PURCHASE AND SALE AGREEMENT
Bloomfield Refining Company
and
Gary-Williams Energy Corporation,
as Sellers
and
Giant Industries Arizona, Inc.,
as Buyer
Dated as of August 8, 1995
TABLE OF CONTENTS
Page
ARTICLE I Definitions and References . . . . . . . . . . . 1
1.01 General Definitions. . . . . . . . . . . . . . . 1
1.02 Exhibits and Schedules . . . . . . . . . . . . .15
1.03 References and Titles. . . . . . . . . . . . . .15
ARTICLE II Purchase and Sale . . . . . . . . . . . . .16
2.01 Purchase and Sale. . . . . . . . . . . . . . . .16
2.02 Effective. . . . . . . . . . . . . . . . . . . .16
2.03 Purchase Price . . . . . . . . . . . . . . . . .16
2.04 Allocation of Purchase Price . . . . . . . . . .16
2.05 Adjustments to Base Purchase Price . . . . . . .16
ARTICLE III Representations and Warranties. . . . . . .17
3.01 Representations and Warranties of Seller . . . .17
3.02 Representations and Warranties of Buyer. . . . .22
ARTICLE IV Covenants . . . . . . . . . . . . . . . . .24
4.01 Covenants of Sellers . . . . . . . . . . . . . .24
4.02 Covenants of Buyer . . . . . . . . . . . . . . .28
ARTICLE V Certain Procedures . . . . . . . . . . . . . . .29
5.01 Environmental Matters. . . . . . . . . . . . . .29
5.02 Personnel, Employment Arrangements and
Employee Benefits . . . . . . . . . . . . . .37
5.03 Casualty Loss. . . . . . . . . . . . . . . . . .40
5.04 Taxes Due with Respect to Transfer of Assets . .41
5.05 Property Tax Proration Amount. . . . . . . . . .41
5.06 Like-Kind Exchange . . . . . . . . . . . . . . .41
5.07 Due Diligence. . . . . . . . . . . . . . . . . .42
ARTICLE VI Conditions to Closing . . . . . . . . . . .42
6.01 Conditions to Obligations of Seller. . . . . . .42
6.02 Conditions to Obligations of Buyer . . . . . . .43
6.03 Conditions to Obligations of Both Parties. . . .52
ARTICLE VII Closing . . . . . . . . . . . . . . . . . .54
7.01 Date of Closing. . . . . . . . . . . . . . . . .54
7.02 Place of Closing . . . . . . . . . . . . . . . .54
7.03 Closing Obligations. . . . . . . . . . . . . . .54
ARTICLE VIII Obligations After Closing . . . . . . . . .58
8.01 Post-Closing Settlement. . . . . . . . . . . . .58
8.02 Recording Fees . . . . . . . . . . . . . . . . .60
8.03 Indemnification. . . . . . . . . . . . . . . . .60
8.04 Assumption of Obligations. . . . . . . . . . . .62
8.05 Identifications, Signs, Trademarks and
Tradenames . . . . . . . . . . . . . . . . . . .63
8.06 Access to Records - Books and Records. . . . . .63
8.07 Waiver of Compliance with Bulk Sales Laws. . . .64
8.08 Covenant Against Competition . . . . . . . . . .64
8.09 Independent Evaluation . . . . . . . . . . . . .64
8.10 Further Assurances . . . . . . . . . . . . . . .65
ARTICLE IX Termination of Agreement. . . . . . . . . .66
9.01 Termination. . . . . . . . . . . . . . . . . . .66
9.02 Return of Information. . . . . . . . . . . . . .67
9 .03 Effect of Termination. . . . . . . . . . . . . .67
ARTICLE X Miscellaneous. . . . . . . . . . . . . . . . . .68
10.01 Expenses . . . . . . . . . . . . . . . . . . . .68
10.02 Notices. . . . . . . . . . . . . . . . . . . . .68
10.03 Amendment. . . . . . . . . . . . . . . . . . . .70
10.04 Assignment . . . . . . . . . . . . . . . . . . .70
10.05 Announcements. . . . . . . . . . . . . . . . . .70
10.06 Counterparts . . . . . . . . . . . . . . . . . .71
10.07 Governing Law. . . . . . . . . . . . . . . . . .71
10.08 Entire Agreement . . . . . . . . . . . . . . . .71
10.09 Parties in Interest. . . . . . . . . . . . . . .72
SCHEDULE OF EXHIBITS AND SCHEDULES
EXHIBITS:
A -- Form of COMMON UNDERTAKING LETTER.
B -- Form of GENERAL DEED, ASSIGNMENT, BILL OF SALE AND
ASSUMPTION, covering all of the Assets.
C -- Form of BILL OF SALE, covering the Refinery
Equipment, the Refinery Facilities and the Refinery
Inventory.
D -- Form of ASSIGNMENT AND CONVEYANCE, covering the
Refinery Real Property (other than the Refinery
Site).
E -- Form of GENERAL WARRANTY DEED, covering the Refinery
Site.
F -- Form of BILL OF SALE, covering the Pipeline
Equipment, the Pipeline Facilities and the Pipeline
Inventory.
G -- Form of ASSIGNMENT AND CONVEYANCE, covering the
Pipeline Real Property.
H -- Form of GUARANTEE AND AGREEMENT.
I -- Form of SELLERS' CERTIFICATE.
J -- Form of BUYER'S CERTIFICATE.
K -- Form of NON-FOREIGN STATUS CERTIFICATE.
L -- Form of CRUDE OIL CONTRACT.
SCHEDULES:
1.01.1 -- Earnout
1.01.2 -- Excluded Contracts
1.01.3 -- Processing Units, Shipping Facilities and
Terminals
1.01.4 -- Refinery Site
1.01.5 -- Refinery Site Encumbrances
2.04 -- Allocation of Purchase Price
3.01(e) -- Contested Taxes
3.01(g) -- Litigation
3.01(j) -- Capital Projects
3.01(k) -- Collective Bargaining Agreements
3.01(l) -- Water and Water Rights
3.01(m) -- Financial Statements
3.01(n) -- Summary of Operations
3.02(g) -- Certain Permits, Licenses and Contracts
5.02(a) -- Retained Employees
6.02(i) -- BOR Draft Permit
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (this "Agreement"), dated as
of August 8, 1995, is among BLOOMFIELD REFINING COMPANY, a Delaware
corporation ("BRC"), with an address of 370 Seventeenth Street,
Suite 5300, Denver, Colorado 80203, GARY-WILLIAMS ENERGY
CORPORATION, a Delaware corporation ("GWEC"), with an address of
370 Seventeenth Street, Suite 5300, Denver, Colorado 80203, and
GIANT INDUSTRIES ARIZONA, INC., an Arizona corporation ("Buyer"),
with an address of 23733 North Scottsdale Road, Scottsdale, Arizona
85255. BRC and GWEC shall be referred to collectively as
"Sellers," and individually as a "Seller." In consideration of the
mutual promises contained herein, the benefits to be derived by
each party hereunder and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Buyer and
Sellers agree as follows:
ARTICLE I
DEFINITIONS AND REFERENCES
1.01 GENERAL DEFINITIONS. As used herein, the terms
"Agreement," "BRC," "GWEC," "Buyer," "Sellers" and "Seller" shall
have the meaning ascribed thereto above, and the following terms
shall have the following meanings:
"ACCOUNTS PAYABLE" shall mean all accounts and other
obligations of the Businesses for the payment of money which are
reflected in accordance with generally acceptable accounting
principles as accounts payable on the books and records of Sellers.
"ACCOUNTS RECEIVABLE" shall mean accounts and other rights of
the Businesses to receive the payment of money which are reflected
in accordance with generally accepted accounting principles as
accounts receivable on the books and records of Sellers.
"ADMINISTRATION" shall have the meaning ascribed to such term
in Subsection 6.02(t).
"AFFILIATE" shall mean with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under
common control with such Person. The term "control" as used in the
preceding sentence means, with respect to any specified Person the
power to direct the management and policies of such Person directly
or indirectly, whether through the ownership of voting stock or
interests, by contract or otherwise; and the terms "controlling"
and "controlled" shall have meanings correlative to the foregoing.
"ANTI-DUMPING REQUIREMENTS" shall have the meaning ascribed to
such term in Subsection 6.02(u).
"ASSETS" shall mean the Refinery Assets and the Pipeline
Assets, but excluding the Excluded Assets.
"BASE PURCHASE PRICE" shall mean $55,000,000 in U.S. currency.
"BEST EFFORTS" shall mean the taking by a party of such action
as would be in accordance with reasonable commercial practices as
applied to the particular matter in question; provided, however,
that such action shall not include the incurrence of unreasonable
expenses.
"BUSINESSES" shall mean the Refinery Business and the Pipeline
Business.
"BUSINESS DAY" shall mean any day other than a Saturday, a
Sunday or a United States federal or New Mexico state banking
holiday.
"BUYER'S EMPLOYEES" shall have the meaning ascribed to such
term in Subsection 5.02(a).
"CAPITAL PROJECTS" shall have the meaning ascribed to such
term in Subsection 3.01(j).
"CAPITAL PROJECTS COSTS" shall mean those costs and expenses
relating to the Capital Projects and paid in the ordinary course by
Sellers after the date of this Agreement.
"CLEANUP" shall have the meaning ascribed to such term in
Subsection 5.01(e).
"CLOSING" shall have the meaning ascribed to such term in
Section 7.01.
"CLOSING DATE" shall have the meaning ascribed to such term in
Section 7.01.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, together with all Treasury Regulations promulgated
thereunder.
"COMMON UNDERTAKING LETTER" shall have the meaning ascribed to
such term in Subsection 5.01(c).
"CONFIDENTIALITY AGREEMENT" shall mean that certain
Confidentiality Agreement, dated as of June 22, 1995, between Buyer
and GII, as Recipient, and Sellers, as Provider.
"CONTRACTS" shall mean all transferable agreements, contracts,
leases of personal property, preferential rights of purchase, calls
on production, agreements for the purchase of non-Four Corners area
crude oil which is delivered or sold to an exchange partner in
consideration for receipts or purchases of Four Corners area crude
oil and other legally binding contractual commitments to which a
Seller or any Affiliate of a Seller is a party (including without
limitation, those which name a Seller as a party) and which are
materially associated with, relate to, or are used in connection
with the Assets or the Businesses, excluding the Excluded
Contracts.
"EARNOUT" shall mean the contingent payment by Buyer to BRC of
up to a net present value of $25,000,000 in accordance with the
terms and provisions of Schedule 1.01.1.
"EFFECTIVE TIME" shall mean 7:00 A.M. on the Closing Date, as
such time is customarily observed in Bloomfield, New Mexico.
"ENVIRONMENTAL INVESTIGATION" shall have the meaning ascribed
to such term in Subsection 5.01(b).
"ENVIRONMENTAL LAWS" shall mean: (i) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended
by the Superfund Amendment and Reauthorization Act and otherwise,
the Resource Conservation and Recovery Act, the Clean Air Act, the
Toxic Substances Control Act, the Safe Drinking Water Act, the
Federal Water Pollution Control Act, the Oil Pollution Act and
other federal laws relating to the use, storage, emission,
discharge, cleanup, removal, remediation, release or threatened
release of Hazardous Substances in any work place or on or into the
air, land, surface waters, ground water or other medium, or
otherwise relating to the manufacture, processing, distribution,
use, treatment, disposal, transportation or handling of Hazardous
Substances; (ii) regulations relating to such federal laws; or
(iii) similar state, local and tribal laws, ordinances and
regulations. Environmental Laws do not include laws concerning man
made material fibers (which term shall not be deemed to include
asbestos or other mineral fibers) or employee health and safety.
"ENVIRONMENTAL LIABILITIES" shall mean any liabilities,
claims, expenses, penalties, fines or other obligations, including
reasonable fees of attorneys, consultants, engineers, accountants
and other advisers, for environmental conditions, situations,
circumstances, events or incidents on, at or concerning,
originating at or relating to the Assets arising under common law
actions or Environmental Laws as in effect on the Effective Time
directly or indirectly from: (i) the use, storage, emission,
discharge, release or threatened release of Hazardous Substances in
any work place or on or into the air, land, surface waters,
groundwater or other medium (on or off site); (ii) the manufacture,
processing, distribution, use, treatment, disposal, transportation
or handling of Hazardous Substances; or (iii) the investigation,
study, correction, cleanup, removal, remediation, or monitoring of
Hazardous Substances. The foregoing notwithstanding, in the case
of: (i) any remediation or other Cleanup of Hazardous Substances
for which Sellers are responsible and liable pursuant to Section
5.01(g) (including, but not limited to, the investigation, study,
correction, cleanup, removal and monitoring of such Hazardous
Substances), such remediation or Cleanup shall be conducted and
performed in accordance with remediation standards in effect up to
the time the remediation or Cleanup is completed; and (ii) any
claims or demands that are within the scope of Section 5.01(g)(iv),
Sellers shall be responsible and liable for such claims and demands
in accordance with, and as required by, all applicable
Environmental Laws without limitation to those Environmental Laws
in effect on the Effective Time.
"ENVIRONMENTAL NOTICE" shall have the meaning ascribed to such
term in Subsection 5.01(d).
"EPA" shall mean the United States Environmental Protection
Agency.
"EQUIPMENT" shall mean all equipment, tools, instruments,
machines, parts, materials, substances, systems, supplies, rolling
stock, furniture, catalysts and chemicals, communications systems
and licenses, vehicles, electronic systems and computers.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"EXCLUDED ASSETS" shall mean the Accounts Receivable, the
Excluded Contracts and all assets of Sellers or Affiliates of
Sellers not associated with, related to or used in connection with
the Businesses, including without limitation (i) the Bluebell and
Altonah gas plants and related gathering systems located in Uintah
and Duchesne Counties, Utah, (ii) Sellers' airplane and hanger, and
(iii) the stock of Gary-Williams Acquisition Company, Gary-Williams
Retail Company and Gary-Williams Production Company. The term
"EXCLUDED ASSETS" shall also include (i) the computers, software
(other than the Refinery linear program in connection with which
Buyer agrees to pay the $5,000 assumption fee), trademarks, office
equipment and supplies and other fixed assets located in the
ordinary course of business in Sellers' office in Denver, Colorado,
(ii) all fixed assets located in the ordinary course of business in
Denver or Arapahoe Counties, Colorado, (iii) all sulfur credits
earned prior to the Effective Time, and (iv) the stock of BRC.
"EXCLUDED CONTRACTS" shall mean those contracts and agreements
listed in Schedule 1.01.2 which are excluded from the terms of this
Agreement and are being retained by Sellers.
"EXISTING ENVIRONMENTAL LIABILITIES" shall mean those
Environmental Liabilities disclosed in a writing of even date
herewith and executed by Buyer and Sellers.
"FACILITIES" shall mean all facilities, units, buildings,
structures, fixtures, terminals, pipelines, tanks and other storage
facilities and similar property used in the refining, processing,
treating, transporting or storage of crude oil and refined
products.
"FEEDSTOCK" shall mean crude oil, natural gas liquids and
other hydrocarbons processed by the Refinery.
"FINAL SETTLEMENT STATEMENT" shall have the meaning ascribed
to such term in Subsection 8.01(a).
"GII" shall mean Giant Industries, Inc., a Delaware
corporation, the direct parent of Buyer.
"HAZARDOUS SUBSTANCES" shall mean any hazardous substance,
extremely hazardous substance, hazardous material, hazardous waste,
toxic substance, pollutant, contaminant, hazardous waste
constituent, radioactive material, petroleum (including without
limitation crude oil or any fraction thereof), any variation of the
foregoing, or any other environmental contaminant.
"H-S-R ACT" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
of the Federal Trade Commission under such act.
"INDEMNIFIED PARTY" shall have the meaning ascribed to such
term in Subsection 8.03(c).
"INDEMNIFYING PARTY" shall have the meaning ascribed to such
term in Subsection 8.03(c).
"INDEMNITY OBLIGATION" shall have the meaning ascribed to such
term in Subsection 8.03(c).
"INTANGIBLE PROPERTY" means patents, copyrights, proprietary
know-how and proprietary technology (but not Licenses thereof),
associated with, related to, or used in connection with the Assets
or the Businesses.
"INTERMEDIATE PRODUCTS" shall mean products that have been
purchased, partially processed or refined and placed in storage
pending blending or further processing in amounts and qualities
that have been historically stored and used in connection with the
Businesses.
"INVENTORY" shall mean readily marketable and saleable or
useable Feedstock, Refined Products and Intermediate Products,
including line fills, salable tank bottoms and work in process.
"LAWS" shall mean all laws, rules, regulations, ordinances and
orders of all federal, state, local and tribal governmental bodies,
authorities and agencies having jurisdiction over the Assets or the
Businesses, other than Environmental Laws.
"LICENSES" shall mean all licenses and other rights to use
proprietary materials, technology, processes and rights in
connection with the Assets and the Businesses.
"LOSS" shall mean any loss, cost, claim, damage, deficiency
and all expenses, including without limitation, attorneys' and
accountants' fees and disbursements.
"MATERIAL EFFECT" shall mean an adverse effect which, in the
reasonable judgment of a comparable industry third party purchasing
assets and businesses comparable to the Assets and Businesses,
would, alone or in the aggregate, cause such a third party not to
purchase the Assets for reasons other than changes or conditions in
the industry and in markets.
"NONTRANSFERABLE PERMITS AND LICENSES" shall mean those
Permits and Licenses which by their terms are not transferable, or,
if by their terms require consent or approval for transfer, such
consents or approvals are not obtained prior to Closing.
"OSHA REQUIREMENTS" shall have the meaning ascribed to such
term in Subsection 6.02(t).
"PERMITS" shall mean any and all permits, authorizations,
certificates, approvals, registrations, premanufacture
notifications or other approvals and licenses granted or required
by any federal, state, local or tribal governmental bodies,
authorities and agencies in connection with the Businesses or the
Assets.
"PERMITTED EXCEPTIONS" shall mean: (a) liens for taxes or
assessments not yet delinquent or, if delinquent, that are being
contested in good faith in the normal course of business; (b)
mechanic's, materialmen's, repairmen's, employees, contractor's,
operator's and similar liens or charges arising in the ordinary
course of business securing amounts not yet due and payable; (c)
easements, rights-of-way, servitudes, permits, surface leases and
other rights with respect to surface operations; pipelines,
grazing, canals, ditches, reservoirs or the like; conditions,
restrictive and protective covenants, common area maintenance
assessments or other similar restrictions and charges; mineral and
royalty reservations and conveyances; and easements for streets,
alleys, highways, pipelines, telephone lines, power lines, railways
and other easements and rights-of-way, on, over or in respect of
any of the Assets; provided in each case that such matters do not
and will not interfere materially with the ownership, operation or
use of the Assets or the Businesses as they are now operated or
used and as they have been operated or used on an historical basis,
nor result in a Material Effect; (d) other minor defects and
irregularities of title affecting the Assets that do not and will
not interfere materially with the ownership, operation or use of
the Assets or the Businesses as they are now owned, operated or
used or as they have been owned, operated or used on an historical
basis, nor result in a Material Effect; and (e) ordinary and
customary rights reserved to or vested in any federal, state, local
or tribal governmental authority to control or regulate the
Businesses or any of the Assets.
"PERSON" shall mean an individual, partnership, corporation,
governmental body, limited liability company, joint venture, trust
or an unincorporated organization or association or other legal
entity.
"PIPELINE" shall mean the crude oil pipeline commonly referred
to as the San Juan Pipeline and located in San Juan County, New
Mexico, and currently owned in part by Buyer and in part by GWEC;
the LPG pipeline connecting the Refinery to the MAPCO pipeline; and
any other pipelines in which Sellers or any Affiliate have an
interest and which are associated with, related to or used in
connection with the San Juan Pipeline, the LPG pipeline and the
Refinery.
"PIPELINE ASSETS" shall mean all of Sellers' and any
Affiliate's property, interests and rights in and to the real
property, personal property and other assets associated with,
related to, or used in connection with the Pipeline and the
Pipeline Business, including without limitation, all of Sellers'
and any Affiliate's property, interests and rights in and to the
Pipeline Real Property, the Pipeline Personal Property, the
Pipeline Inventory and the Pipeline Contracts.
"PIPELINE BUSINESS" shall mean Sellers' and any Affiliate's
business relating to the transportation of crude oil and LPGs
through the Pipeline.
"PIPELINE CONTRACTS" shall mean all Contracts associated with,
related to or used in connection with the Pipeline or the Pipeline
Business.
"PIPELINE EQUIPMENT" shall mean all Equipment associated with,
related to or used in connection with the Pipeline and the Pipeline
Business.
"PIPELINE FACILITIES" shall mean all Facilities associated
with, related to or used in connection with the Pipeline and the
Pipeline Business, including without limitation, all pipes,
pipelines, tanks and storage facilities, terminals, pumps and
pumping stations.
"PIPELINE INVENTORY" shall mean all Inventory owned by Sellers
or any Affiliate located at or stored on or in the Pipeline
Facilities as of the Effective Time.
"PIPELINE PERSONAL PROPERTY" shall mean the Pipeline Equipment
and all other tangible personal property (including any Pipeline
Facilities and fixtures that are personal property under state law,
but excluding Pipeline Inventory) associated with, related to or
used in connection with the Pipeline or the Pipeline Business.
"PIPELINE REAL PROPERTY" shall mean the real property
(including any Pipeline Facilities and fixtures that are real
property under state law) associated with, related to or used in
connection with the Pipeline, or the Pipeline Business, including
without limitation, all leases, easements, servitudes,
rights-of-way, mineral rights, water rights, appurtenant rights,
permits, licenses, franchises, grants, certificates and rights to
use the surface.
"PRELIMINARY AMOUNT" shall have the meaning ascribed to such
term in Subsection 6.03(d).
"PRELIMINARY SETTLEMENT STATEMENT" shall have the meaning
ascribed to such term in Subsection 6.03(d).
"PREPAID ITEMS" shall mean necessary goods and services to be
delivered to the Refinery in the ordinary course of business on or
after the Closing Date for which Seller has prepaid as reflected in
accordance with generally accepted accounting principles on the
books and records of Sellers and for which Buyer will receive the
proportionate benefit which at the date of this Agreement are
estimated by Sellers to be approximately $25,000.
"PROPERTY TAX PRORATION AMOUNT" shall have the meaning
ascribed to such term in Section 5.05.
"RCRA" shall mean the federal Resource Conservation and
Recovery Act.
"RECORDS" shall mean and include all originals and copies, in
whatever form, of agreements, documents, tapes, maps, manuals,
books, financial information, reports, engineering designs,
surveys, plans and specifications, title reports, test results,
files and other records in the possession or control of Sellers and
reasonably necessary or desirable for analyzing, owning, operating
and maintaining the Assets and the Businesses, excluding personnel
and other records that are subject to an obligation of
confidentiality or are not transferable under applicable agreements
with third parties or any applicable laws, rules, regulations or
orders.
"REFINED PRODUCTS" shall mean gasoline, diesel fuel, aviation
fuel, fuel oil and other refined products produced by the Refinery.
"REFINERY" shall mean the refinery known as the Bloomfield
Refinery.
"REFINERY ASSETS" shall mean all of Sellers' and any
Affiliate's property, interests and rights in and to the real
property, personal property, and other assets associated with,
related to or used in connection with the Refinery or the Refinery
Business, including without limitation, all of Sellers' and any
Affiliate's property, interests and rights in and to the Refinery
Real Property, the Refinery Personal Property, the Intangible
Property, the Refinery Inventory and the Refinery Contracts.
"REFINERY BUSINESS" shall mean Sellers' and any Affiliate's
business relating to the purchase, transportation, refinement,
processing and sale of Feedstock and Refined Products in the
Refinery's historical area of operation.
"REFINERY CONTRACTS" shall mean all Contracts associated with,
related to or used in connection with the Refinery or the Refinery
Business.
"REFINERY EQUIPMENT" shall mean all Equipment associated with,
related to or used in connection with the Refinery or the Refinery
Business.
"REFINERY FACILITIES" shall mean all Facilities associated
with, related to or used in connection with the Refinery or the
Refinery Business, including without limitation, the processing
units, shipping facilities and terminals described on Schedule
1.01.3.
"REFINERY INVENTORY" shall mean all Inventory owned by Sellers
or any Affiliate located at or stored on or in the Refinery
Facilities as of the Effective Time.
"REFINERY PERSONAL PROPERTY" shall mean the Refinery Equipment
and all other tangible personal property (including any Refinery
Facilities and fixtures that are personal property under state law,
but excluding Refinery Inventory) associated with, related to, or
used in connection with the Refinery or the Refinery Business.
"REFINERY REAL PROPERTY" shall mean the Refinery Site and the
other real property (including any Refinery Facilities and fixtures
that are real property under state law) associated with, related
to, or used in connection with the Refinery or the Refinery
Business, including without limitation, all leases, easements,
servitudes, rights-of-way, mineral rights, water rights,
appurtenant rights, permits, licenses, franchises, grants,
certificates and other rights to use the surface.
"REFINERY SITE" shall mean the real property on which the
Refinery is located as more specifically described on Schedule
1.01.4.
"REFINERY SITE ENCUMBRANCES" shall mean the liens, charges,
encumbrances, contracts, agreements, instruments, obligations,
defects and irregularities affecting the Refinery Site as listed on
Schedule 1.01.5.
"TRANSFERABLE PERMITS AND LICENSES" shall mean those Permits
and Licenses which by their terms are transferable, or, if by their
terms require consent or approval for transfer, such consent or
approval is obtained prior to Closing.
"TRANSFER DOCUMENTS" shall have the meaning ascribed to such
term in Subsection 7.03(a).
"TRANSFER TAXES" shall have the meaning ascribed to such term
in Section 5.04.
1.02 EXHIBITS AND SCHEDULES. All Exhibits and Schedules
referred to in this Agreement have been separately bound and
initialed by the duly authorized officers of Buyer and Sellers.
All of such Exhibits and Schedules are hereby incorporated in this
Agreement by reference and constitute a part of this Agreement.
Each party to this Agreement and its counsel has received a
complete set of the Exhibits and Schedules prior to and as of the
execution of this Agreement.
1.03 REFERENCES AND TITLES. All references in this Agreement
to Exhibits, Schedules, Articles, Sections, Subsections, and other
subdivisions refer to the Exhibits, Schedules, Articles, Sections,
Subsections and other subdivisions of this Agreement unless
expressly provided otherwise. Titles and headings appearing at the
beginning of any subdivision are for convenience only and do not
constitute a part of any such subdivision and shall be disregarded
in construing the language contained in this Agreement. The words
"this Agreement," "herein," "hereof," "hereby," "hereunder" and
words of similar import refer to this Agreement as a whole and not
to any particular subdivision unless expressly so limited. The
phrases "this Article," "this Section" and "this Subsection" and
similar phrases refer only to the Articles, Sections or Subsections
hereof in which the phrase occurs. The word "or" is not exclusive.
Pronouns in masculine, feminine and neuter gender shall be
construed to include any other gender. Words in the singular form
shall be construed to include the plural and words in the plural
form shall be construed to include the singular, unless the context
otherwise requires. The words "operated as they have been operated
on an historical basis" and words of similar import shall include
physical operation, financial results of operation and all other
aspects of operation, but shall not include changes or conditions
affecting the industry or markets.
ARTICLE II
PURCHASE AND SALE
2.01 PURCHASE AND SALE. Sellers agree to sell and transfer
to Buyer, and Buyer agrees to purchase and accept delivery of, the
Assets, subject to the terms and conditions of this Agreement.
2.02 EFFECTIVE. The purchase and sale of the Assets shall be
effective for all purposes as of the Effective Time.
2.03 PURCHASE PRICE. The consideration to be paid by Buyer
to Sellers for the Assets shall be: (i) the Base Purchase Price as
adjusted pursuant to Section 2.05; plus (ii) the Earnout if and
when earned.
2.04 ALLOCATION OF PURCHASE PRICE. The purchase price shall
be allocated among the Assets and among Sellers as set forth in
Schedule 2.04. Buyer and Sellers shall not take any position on
their respective income tax returns or financial statements that is
inconsistent with the allocation of the purchase price as set forth
in Schedule 2.04, and Buyer and Sellers shall duly prepare and
timely file such reports and information returns as may be required
under Section 1060 of the Code to report the allocation of the
purchase price among the Assets in a manner consistent with
Schedule 2.04.
2.05 ADJUSTMENTS TO BASE PURCHASE PRICE. The Base Purchase
Price shall be adjusted upward by the value of the Refinery
Inventory and the Pipeline Inventory as of the Effective Time, and
the cost of any Prepaid Items (apportioned as of the Effective
Time). The value of Inventory shall be determined: (a) for
Feedstock, using weighted average laid-in prices as of the
Effective Time; (b) for Refined Products, using Bloomfield O.P.I.S.
average product prices as of the Effective Time less a discount
equal to the difference between the prior calendar month O.P.I.S.
average product prices and the realized netbacks for those products
for the prior calendar month (Refined Products prices not reported
in O.P.I.S. shall be the fair market value thereof); (c) for
Intermediate Products (other than blend stocks) using the prices
for Refined Products for the refined components to be produced from
the Intermediate Products less $.03 per gallon; and (d) for blend
stocks, using the weighted average laid-in price as of the
Effective Time. Work in process (estimated to be no more than
1,000 barrels) shall be transferred without additional
consideration as part of the Base Purchase Price. The cost of
Prepaid Items shall be the amount Sellers actually paid in good
faith in arm's length transactions for such Prepaid Items. The
Base Purchase Price shall also be adjusted upward by the Capital
Projects Costs, and downward by the Property Tax Proration Amount.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01 REPRESENTATIONS AND WARRANTIES OF SELLER. Sellers
represent and warrant to Buyer as follows:
(a) ORGANIZATION. Sellers are corporations duly
organized, validly existing and in good standing under the laws of
the State of Delaware, and Sellers are duly qualified to carry on
their business in the State of New Mexico.
(b) POWER AND AUTHORITY. Sellers have all requisite
power and authority to carry on their business as presently
conducted, to enter into this Agreement, to sell the Assets on the
terms described in this Agreement, and to perform their obligations
under this Agreement. The consummation of the transactions
provided for in this Agreement will not violate, nor be in conflict
with, any provision of either Seller's charter, bylaws or governing
documents, or any agreement or instrument to which either Seller is
a party or is bound, or any judgment, decree, order, statute, rule
or regulation applicable to either Seller.
(c) AUTHORIZATION. The execution, delivery and
performance of this Agreement and the transactions provided for
herein have been duly and validly authorized by all requisite
action on the part of Sellers and, if necessary, Sellers'
shareholders.
(d) BINDING OBLIGATIONS. This Agreement has been duly
executed and delivered on behalf of Sellers, and at the Closing all
documents and instruments required hereunder to be executed and
delivered by Sellers shall have been duly executed and delivered.
This Agreement does, and such documents and instruments shall,
constitute legal, valid and binding obligations of Sellers,
enforceable against Sellers in accordance with their terms, subject
to applicable bankruptcy, insolvency and similar laws relating to
or affecting the enforcement of creditors' rights generally and to
general principles of equity.
(e) TAXES. All taxes, including without limitation all
ad valorem, property, excise, sales, use, assessments, special
assessments, pipeline, windfall profit, severance, payroll,
employment, unemployment compensation and other governmental
charges and assessments (together with any and all interest and
penalties) that would result in a lien on the Assets or otherwise
affect title thereto or that Buyer (as the owner of the Assets and
Businesses after the Effective Time) would be responsible for after
the Effective Time that have become due and payable have been
properly and timely withheld, collected, deposited, and paid prior
to becoming delinquent, or are being contested in good faith in the
normal course of business. All such taxes which are being so
contested are described on Schedule 3.01(e), and Sellers shall
continue to be responsible therefor.
(f) BROKER'S AND FINDER'S FEES. Sellers have incurred
no liability, contingent or otherwise, for brokers' or finders'
fees relating to the transactions provided for in this Agreement
for which Buyer shall have any responsibility whatsoever.
(g) LITIGATION. Except for pending or threatened
litigation expressly described as Existing Environmental
Liabilities and those matters listed on Schedule 3.01(g), no suit,
action, investigation, material dispute or other proceeding is
pending or, to the best of Sellers' knowledge, threatened before
any court, arbitrator, or governmental agency that, if determined
adversely would result in any of the following: (i) a Material
Effect, (ii) impairment or loss of title to any portion of the
Assets or the value thereof or of the Businesses in any material
respect, or (iii) any prohibition, restriction, limitation, or
other matter that would affect the use, operation or enjoyment of
the Assets and the Businesses in any material respect.
(h) COMPLIANCE WITH LAWS. Except as disclosed in a
writing of even date herewith and executed by Buyer and Sellers,
all Laws relating to the Assets, the Businesses or the ownership
and operation thereof as they are now operated and as they have
been operated on an historical basis have been complied with in all
material respects.
(i) NON-FOREIGN PERSON. Neither Seller is a
non-resident alien, foreign corporation, foreign partnership,
foreign trust or foreign estate (as those terms are defined in the
Code).
(j) CAPITAL PROJECTS. Schedule 3.01(j) contains a
listing of all material capital projects (the "CAPITAL PROJECTS")
being conducted or proposed (i.e., budgeted or approved) to be
conducted in relation to the Assets or the Businesses (other than
scheduled turnarounds), together with the estimated costs thereof
and the estimated cost remaining to be paid for completion.
(k) COLLECTIVE BARGAINING AGREEMENTS. Schedule 3.01(k)
sets forth all collective bargaining agreements to which Sellers
are parties or are bound and relating to the Businesses, and all
long term employment contracts relating to employees who may become
Buyer's Employees. During the past year Sellers have not been
advised of any threatened strikes, slow downs, work stoppages,
representation questions, material grievances or similar labor
activities relating to the Businesses. The consummation of the
transactions provided for in this Agreement does not violate any
collective bargaining agreement with or for the benefit of any
employee of Sellers, and shall not result in a material violation
of any Laws relating to employment obligations of Sellers.
(l) WATER RIGHTS. Schedule 3.01(l) sets forth a
description of the water and water rights used by Sellers in
connection with the Assets and the Businesses.
(m) FINANCIAL STATEMENTS. Schedule 3.01(m) sets forth
(i) audited financial statements as of the close of BRC's fiscal
years ended December 31, 1990, 1991, 1992, 1993 and 1994, (ii)
unaudited financial statements for 1995 as of March 31, and (iii)
profit and loss statements for April and May of 1995. These
financial statements, together with the notes thereto, and the
profit and loss statements are complete and correct in all material
respects and present fairly the financial position and the results
of operations of BRC as of the dates and for the periods indicated.
The financial statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent
basis. Since March 31, 1995, there has not been any change in
operations, assets or business which would have a Material Effect.
(n) SUMMARY OF OPERATIONS. Schedule 3.01(n) sets forth
a financial summary of operations of the Businesses for the periods
indicated prepared from the books and records of the Sellers. Such
financial summary (taking into consideration all notes and
explanations contained therein and exclusions for transportation
and marketing personnel that overlap with Buyer's transportation
and marketing personnel) fairly represents the results of
operations for the periods indicated in all material respects.
Since the last period indicated in such financial summary, there
has not been any change in the Assets or the Businesses or the
operations thereof which would have a Material Effect.
(o) CLAIMS AGAINST TITLE. To the best knowledge of
Sellers, subject to Permitted Exceptions and the Refinery Site
Encumbrances, no claim or demand has been made or asserted
challenging Sellers' title, ownership use or operation of the
Refinery Assets or the Pipeline Assets.
(p) NECESSARY ASSETS. Except for the Excluded Assets
and water rights, the Refinery Assets and the Pipeline Assets
include all tangible property necessary for owning and operating
the Refinery, Sellers' interest in the Pipeline, and the Businesses
as they are currently being operated and as they have been operated
on an historical basis.
3.02 REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer
represents and warrants to Sellers as follows:
(a) ORGANIZATION. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Arizona, and Buyer is duly qualified to carry on its
business in the State of New Mexico.
(b) POWER AND AUTHORITY. Buyer has all requisite power
and authority to carry on its business as presently conducted, to
enter into this Agreement, to purchase the Assets on the terms
described in this Agreement and to perform its other obligations
under this Agreement. The consummation of the transactions
provided for in this Agreement will not violate, nor be in conflict
with, any provision of Buyer's charter, bylaws or governing
documents, or any agreement or instrument to which Buyer is a party
or is bound, or any judgment, decree, order, statute, rule or
regulation applicable to Buyer.
(c) DUE AUTHORIZATION. The execution, delivery and
performance of this Agreement and the transactions provided for
herein have been duly and validly authorized by all requisite
action on the part of Buyer.
(d) BINDING OBLIGATIONS. This Agreement has been duly
executed and delivered on behalf of Buyer, and at the Closing all
documents and instruments required hereunder to be executed and
delivered by Buyer shall have been duly executed and delivered.
This Agreement does, and such documents and instruments shall,
constitute legal, valid and binding obligations of Buyer,
enforceable against Buyer in accordance with their terms, subject
to applicable bankruptcy, insolvency and similar laws relating to
or affecting the enforcement of creditors' rights generally and to
general principles of equity.
(e) QUALIFIED. Buyer is duly qualified to own, hold
and operate assets customary in the industry for the Businesses,
including without limitation all industry typical leases,
easements, rights-of-way and other agreements covering, affecting
or otherwise relating to federal, state and tribal lands.
(f) BROKER'S AND FINDER'S FEES. Buyer has incurred no
liability, contingent or otherwise, for brokers' or finders' fees
relating to the transactions provided for in this Agreement for
which Sellers shall have any responsibility whatsoever.
(g) ACCEPTANCE OF CERTAIN PERMITS, LICENSES AND
CONTRACTS. Notwithstanding anything contained herein to the
contrary, Buyer has received copies of the Permits, Licenses,
Contracts and other documents listed on Schedule 3.02(g), and
copies of the Refinery Site Encumbrances; and Buyer acknowledges
that such items do not result in a Material Effect and are
otherwise acceptable to Buyer, and Buyer shall not assert a failure
of a condition to Closing as a result of the terms and provisions
of such items. Provided the foregoing shall not prohibit Buyer
from raising the condition in Subsection 6.02(p), except for fees,
costs and expenses specifically enumerated in such items.
ARTICLE IV
COVENANTS
4.01 COVENANTS OF SELLERS. From the date hereof through the
Closing Date, Sellers covenant and agree with Buyer as follows:
(a) ACCESS TO INFORMATION. In order to assist Buyer in
Buyer's due diligence review as provided in Section 5.07 and
Buyer's review of the accuracy of Sellers' representations and
warranties, Sellers shall permit Buyer and its authorized
employees, agents, consultants, accountants, and legal counsel
access, at Buyer's sole expense, risk and cost, during normal
business hours, to the Records and the Assets and will furnish
Buyer with such additional financial and operating data and other
information pertaining to the Businesses as Buyer may reasonably
request to the extent that such access and disclosure would not
violate the terms of any agreement to which Sellers are bound or
any applicable law, rule, regulation or order; provided, however,
that the confidentiality of any data or information to which Buyer
is given access shall be maintained by Buyer and its
representatives (including employees, agents, consultants,
accountants and legal counsel) in accordance with the
Confidentiality Agreement, and Buyer shall be liable for any
disclosure or use in violation thereof. Sellers shall promptly
provide Buyer with a listing of any such matters withheld pursuant
to the provisions of this Section.
(b) CERTAIN CHANGES. Except as contemplated in this
Agreement, Sellers will not, without first obtaining the consent of
Buyer (which consent will not be unreasonably withheld): (i) make
any change in the nature of the Businesses or carry on the
Businesses other than in the ordinary course; (ii) enter into or
amend in any material respect any Contract other than in the
ordinary course of business; (iii) refrain from using its Best
Efforts to maintain all qualifications of Sellers which are
required for them to carry on the Businesses; (iv) sell or
otherwise transfer or encumber (other than liens and security
interests to be released at Closing) title to any of the Assets,
other than Inventory in the ordinary course of business and
personal property that is replaced by equivalent property or
consumed in the normal operation of the Refinery or the Pipeline;
(v) except to the extent otherwise required by applicable legal
requirements, fail to maintain their books and records in the
usual, regular and ordinary manner and consistent with past
practices; or (vi) commit itself to do any of the foregoing.
(c) MAINTENANCE OF ASSETS. Sellers shall cause the
Assets to be maintained and operated in a good and workmanlike
manner consistent with past practices and industry standards, shall
maintain insurance now in force with respect to the Assets and
shall pay or cause to be paid all costs and expenses incurred in
connection therewith.
(d) OPERATION OF BUSINESSES AND MAINTENANCE OF
INVENTORY. Sellers shall carry on the Businesses in substantially
the same manner as Sellers have heretofore and shall not introduce
any new method of management, operation or accounting with respect
to the Businesses. Sellers shall use reasonable efforts to
maintain the customers, good will and reputation of the Businesses,
and shall maintain Inventory, supplies and spare parts in the
ordinary course of business consistent with past practice in
amounts reasonably sufficient to allow Buyer to continue operations
of the Assets in the ordinary course immediately after the Closing.
(e) COMPLIANCE WITH LAWS. All Laws relating to the
Assets and the Businesses shall be complied with in all material
respects.
(f) BEST EFFORTS. Subject to Sellers' rights
hereunder, Sellers shall use their Best Efforts to take or cause to
be taken all such actions as may be necessary or advisable to
consummate and make effective the sale of the Assets and the
transactions provided for in this Agreement and to assure that as
of the Closing Date they will not be under any material corporate,
legal or contractual restriction that would prohibit or delay the
timely consummation of such transactions; and Sellers will use
their Best Efforts to obtain the satisfaction of the conditions to
Closing set forth in Section 6.02 hereof.
(g) H-S-R ACT FILING. As soon as practicable after the
date hereof, but in no event later than five Business Days after
the date hereof, Sellers shall submit all necessary filings for
Sellers in connection with the transactions provided for in this
Agreement under the H-S-R Act.
(h) TRANSFER OF PERMITS AND LICENSES AND CONTRACTS.
Sellers shall use their Best Efforts to have all Transferable
Permits and Licenses transferred to Buyer at the Closing, and shall
assist Buyer in obtaining replacement or substitute Permits and
Licenses for the Nontransferable Permits and Licenses. Sellers
shall use their Best Efforts to have the Contracts transferred to
Buyer at the Closing; and shall assist Buyer in obtaining
replacement or substitute contracts and agreements for the
contracts and agreements (other than those included within the
Excluded Contracts) which would be Contracts except that such
contracts and agreements are not transferrable.
(i) CONTRACTS. On or before ten days after the date of
this Agreement, Sellers shall provide Buyer with a list (and copies
of) of all material Contracts, all Contracts with Affiliates, and
any Contracts that do not expire within 180-days of the date hereof
or cannot be terminated or canceled on 180-days or less notice.
Such list shall also separately list all material contracts which
would be Contracts except that Sellers believe such contracts to be
not transferable.
(j) PERMITS AND LICENSES; INTANGIBLE PROPERTY. On or
before ten days after the date of this Agreement, Sellers shall
provide Buyer with a list (and copies of) all material Permits and
Licenses and all Intangible Property.
(k) NON-TRANSFERABLE RECORDS. As soon as practical
after the date of this Agreement, Sellers shall provide Buyer with
a list of the Records, if any, that are not transferrable under
applicable agreements with third parties or any applicable law,
rule, regulation or order.
(l) INFORMATION FOR SEC FILINGS. Sellers shall provide
all information in their possession or control reasonably required
for Buyer to make any securities filings in connection with the
transaction provided for in this Agreement, including but not
limited to audited financial statements and unaudited summarized
data as may be required by the rules and regulations of the
Securities and Exchange Commission; provided, however, all
reasonable costs and expenses incurred by Sellers in connection
therewith shall be borne and paid by Buyer. Notwithstanding the
foregoing, Sellers shall not be required to provide any such
information if in doing so it would require Sellers to incur
unreasonable costs and expenses unless Buyer agrees to reimburse
Sellers for such added costs and expenses.
(m) NOTICES. Sellers shall promptly notify Buyer in
writing of: (a) all events, circumstances, facts and occurrences
known to Sellers which would result in a breach of a representation
or warranty or covenant of the Sellers; (b) all other material
developments known to Sellers affecting the Assets and the
Businesses which would have a Material Effect; and (c) receipt of a
notice from a third party that would cause one of the conditions in
Section 6.02 not to be met.
4.02 COVENANTS OF BUYER. From the date hereof through the
Closing, Buyer covenants and agrees with Sellers as follows:
(a) BEST EFFORTS. Subject to Buyer's rights hereunder,
Buyer shall use its Best Efforts to take or cause to be taken all
such actions as may be necessary or advisable to consummate and
make effective the purchase of the Assets and the transactions
provided for in this Agreement and to assure that as of the Closing
Date it will not be under any material corporate, legal or
contractual restriction that would prohibit or delay the timely
consummation of such transactions; and Buyer will use its Best
Efforts to obtain the satisfaction of the conditions to Closing set
forth in Section 6.01.
(b) H-S-R ACT. As soon as practicable after the date
hereof, but in no event later than five Business Days after the
date hereof, Buyer shall submit all necessary filings for Buyer in
connection with the transactions provided for in this Agreement
under the H-S-R Act.
(c) FINANCIAL COMMITMENTS. Subject to Buyer's rights
hereunder, Buyer shall obtain all necessary bonds, insurance,
guaranties, letters of credit and similar financial commitments in
connection with (i) the transfer of the Transferrable Permits and
Licenses, (ii) obtaining replacement or substitute Permits and
Licenses for the Nontransferable Permits and Licenses, (iii) the
transfer of the Contracts, and (iv) obtaining replacement or
substitute contracts and agreements (other than those within the
Excluded Contracts) which would be Contracts except that such
contracts and agreements are not transferable.
(d) TRANSFER OF PERMITS AND LICENSES AND CONTRACTS.
Buyer shall use its Best Efforts to obtain replacement or
substitute Permits and Licenses for the Nontransferable Permits and
Licenses; and shall assist Sellers in having the Transferable
Permits and Licenses transferred to Buyer at the Closing. Buyer
shall use its best efforts to obtain replacement or substitute
contracts and agreements for the contracts and agreements (other
than those included within the Excluded Contracts) which would be
Contracts except that such contracts and agreements are not
transferrable; and shall assist Sellers in having the Contracts
transferred to Buyer at the Closing.
ARTICLE V
CERTAIN PROCEDURES
5.01 ENVIRONMENTAL MATTERS.
(a) COMPLIANCE WITH ENVIRONMENTAL LAWS. Except for the
Existing Environmental Liabilities, to the best knowledge of
Sellers the Assets, the Businesses and the ownership and operation
thereof as they are currently being owned and operated and as they
have been owned and operated on an historical basis and all Refined
Products produced thereby are in compliance with all Environmental
Laws, the failure of which compliance could have a Material Effect.
(b) ACCESS FOR INSPECTION. From the date hereof until
the Effective Time, Buyer shall have the right to make an
environmental assessment of the Assets at Buyer's sole risk and
expense in compliance with the terms and conditions described in
this Section ("ENVIRONMENTAL INVESTIGATION"). Sellers agree to
cooperate with reasonable requests by Buyer and its agents in
connection with the Environmental Investigation.
(c) ENVIRONMENTAL INVESTIGATION. If Buyer exercises
its right pursuant to Subsection 5.01(b) to make an Environmental
Investigation of the Assets, Buyer and its agents shall have the
right, subject to compliance with the provisions of this Section,
to enter upon the Assets and all structures and improvements
thereon, inspect the same, conduct soil and water tests and
borings, and conduct such other tests, examinations, investigations
and studies as may be necessary or appropriate in Buyer's
reasonable judgment for the preparation of appropriate engineering
and other reports relating to the Assets, their condition, and the
presence thereon of any Hazardous Substances. Buyer shall give
Sellers at least two Business Days' notice prior to conducting any
such test, which notice shall set forth with specificity the
procedures to be used; and Sellers shall be entitled to be present
during any such tests and shall be entitled to conduct their own
tests, including tests using split samples. Buyer shall exercise
all due diligence in safeguarding and maintaining as confidential
all data or information acquired during its Environmental
Investigation, and all such data and information shall be subject
to the terms of the Confidentiality Agreement. If Buyer or its
agents prepares any report documenting any Environmental
Investigation, Buyer shall furnish copies thereof to Sellers, and
Sellers shall exercise all due diligence in safeguarding and
maintaining any such report as confidential. Buyer waives and
releases all claims and demands against Sellers, their respective
directors, officers, shareholders, employees and agents for injury
to or death of persons or damage to property arising in any way
from any Environmental Investigation, except to the extent such
claims are caused by the negligence or willful misconduct of
Sellers, or their directors, officers, shareholders, employees and
agents in connection with such Environmental Investigation. Buyer
and Sellers have executed a letter relating to any Environmental
Investigation in the form of Exhibit A (the "COMMON UNDERTAKING
LETTER"), the provisions of which shall survive the execution of
this Agreement.
(d) ENVIRONMENTAL NOTICE; LOSSES. If Buyer determines
reasonably and in good faith that any portion of the Assets or the
Businesses is adversely affected by Environmental Liabilities other
than (i) Existing Environmental Liabilities, (ii) Environmental
Liabilities attributable to the actions or omissions of Buyer in
conducting the Environmental Investigation and (iii) Environmental
Liabilities related to the Pipeline Assets of which Buyer had
knowledge prior to the date of this Agreement as a result of its
prior ownership interest in the Pipeline Assets, Buyer shall give
Sellers one or more notices (an "ENVIRONMENTAL NOTICE") thereof on
or before the Effective Time, if the Environmental Liabilities are
discovered prior to the Effective Time, or on or before one year
after the Effective Time if the Environmental Liabilities are
discovered after the Effective Time. Buyer shall provide Sellers
with a copy of any report or reports of the results of the
Environmental Investigation and shall disclose to Sellers the
discovery of any Hazardous Substance or other matter that could
result in Environmental Liabilities. Sellers shall exercise all
due diligence in safeguarding and maintaining as confidential any
such reports, the Environmental Notice, and any information
relating to the discovery of any Hazardous Substance or any other
matter that could result in Environmental Liabilities. The
Environmental Notice shall describe such matters and include copies
of reports, tests, photographs and other documentary evidence
supporting the position that an Environmental Liability exists.
With respect to Environmental Notices received on or before the
Closing, Sellers shall either: (i) terminate this Agreement if
allowed by Section 5.01(f); or (ii) give written notice to Buyer
that it will remain responsible and liable for the Environmental
Liabilities identified in the Environmental Notice.
(e) CLEANUP. From and after the Closing, Sellers and
their agents shall have the right, subject to compliance with the
provisions of this Section, to enter upon the Assets for the
purpose of conducting any remediation or restoration ("CLEANUP")
required to remedy any Environmental Liabilities for which Sellers
remain responsible and liable after the Closing pursuant to Section
5.01(g). Sellers shall give Buyer at least two Business Days'
notice prior to visits or for activities that will not affect the
normal operation of the Assets. Sellers shall give Buyer at least
ten Business Days' notice of activities that will affect normal
operation. Sellers shall not, to the extent reasonably possible,
interfere with Buyer's use or operation of the Assets, or the
conduct of the Businesses, in conducting any Cleanup. Sellers
agree to use their best efforts to complete any Cleanup in a timely
manner. For purposes of all applicable Laws, Sellers shall be
considered the "generator" of any Hazardous Substances generated
during any Cleanup conducted by Sellers, and Sellers shall own any
Hazardous Substances, including any water, soil and other media
contaminated with Hazardous Substances, that is treated, stored or
disposed of in connection with Sellers' Cleanup activities. If
Sellers or their agents prepare any reports in connection with a
Cleanup, Sellers shall furnish copies thereof to Buyer, and Buyer
shall exercise all due diligence in safeguarding and maintaining
any such report as confidential in accordance with the
Confidentiality Agreement. Sellers waive and release all claims
and demands against Buyer, its directors, officers, shareholders,
employees and agents for injury to or death of persons or damage to
property arising in any way from a Cleanup, except to the extent
such claims are caused by the negligence or willful misconduct of
Buyer, its directors, officers, employees and agents.
(f) TERMINATION OF AGREEMENT. If the Loss reasonably
expected to be incurred in connection with one or more of the
Environmental Liabilities identified in one or more Environmental
Notices received prior to Closing in the aggregate is greater than
five percent of the Base Purchase Price, Sellers or Buyer may
terminate this Agreement without liability to either party.
(g) ENVIRONMENTAL LIABILITIES RETAINED BY SELLER.
Sellers expressly retain responsibility and liability for and agree
to pay, perform, fulfill and discharge the following Environmental
Liabilities:
(i) all Environmental Liabilities existing with
regard to the Assets or the Businesses that are known to Sellers on
the date of this Agreement and that are not disclosed in a writing
of even date herewith executed by Buyer and Sellers;
(ii) all Environmental Liabilities that are
identified in one or more Environmental Notices delivered to
Sellers on or before Closing (if the Environmental Liabilities are
discovered prior to that date) or on or before one year after the
Closing (if the Environmental Liabilities are discovered after the
Closing but before one year after Closing);
(iii) all Environmental Liabilities arising from or
in connection with claims made by third parties (other than claims
made by governmental entities requiring or requesting that Sellers
or Buyer clean up, remove or otherwise remediate any Hazardous
Substance) at any time, whether before or after the Effective Time,
arising out of or in connection with operations or other activities
conducted by such third parties on or associated with the Assets,
or the presence of such third parties on the Assets, prior to the
Effective Time and during the period of Sellers' or an Affiliate's
ownership or operation of the Assets;
(iv) all Environmental Liabilities arising from or
in connection with any claims or demands made at any time, whether
before or after the Effective Time, arising out of or in connection
with any Hazardous Substances that were transported off of the
Assets prior to the Effective Time by Sellers, an Affiliate or
their agents for purposes of treatment, storage or disposal;
(v) all Environmental Liabilities arising from or
in connection with claims made by third parties ( including
governmental entities) within two years after the Effective Time
arising out of or in connection with any discharge or other release
of Hazardous Substances off of the Assets prior to the Effective
Time, or the migration off of the Assets of Hazardous Substances
that were discharged or otherwise released on the Assets prior to
the Effective Time;
(vi) all Environmental Liabilities arising from or
in connection with tort claims for injury to human health made by
third parties (other than claims made by governmental entities
requiring or requesting that Sellers or Buyer clean up, remove or
otherwise remediate any Hazardous Substance) at any time, whether
before or after the Effective Time, arising out of or in connection
with the presence in the air, in groundwater used for drinking
purposes, or in the San Juan River of Hazardous Substances
discharged or otherwise released off of the Assets prior to the
Effective Time, or Hazardous Substances that were discharged or
otherwise released on the Assets prior to the Effective Time and
have migrated off of the Assets; and
(vii) all fines, penalties and related assessments
for Environmental Liabilities assessed or imposed by governmental
entities relating to, arising out of or pertaining to the Assets,
the Businesses or the ownership or operation thereof, but only to
the extent such fines, penalties and assessments pertain to the
period of Sellers' or Affiliate's ownership or operation of the
Assets.
Environmental Liabilities retained by Sellers in this
Section 5.01(g) shall not include (w) any Environmental Liabilities
known to Buyer prior to the Effective Time that are not disclosed
to Sellers by an Environmental Notice given prior to Closing and
(x) any Environmental Liabilities for which Buyer has liability
prior to the Effective Time by virtue of its existing ownership
interest in the Pipeline Assets, but only to the extent of such
ownership interest. Environmental Liabilities retained by Sellers
in this Section 5.01(g) also shall not include Environmental
Liabilities that result either from (y) cleanup or other remedial
actions taken by Buyer voluntarily prior to demand therefor by a
third party including any governmental entity, or (z) notices given
by Buyer to any third party of facts or circumstances concerning
the Assets that could provide the basis for Environmental
Liabilities, except notices requested or required by a governmental
entity or required by any Law or Environmental Law.
(h) ENVIRONMENTAL LIABILITIES ASSUMED BY BUYER. Except
for the Environmental Liabilities retained by Sellers pursuant to
Section 5.01(g), upon Closing Buyer shall assume and agree to pay,
perform, fulfill and discharge all Environmental Liabilities
arising before, as of or after the Effective Time for which Sellers
would otherwise have responsibility (including those Environmental
Liabilities relating to the Assets and contractually assumed by
Sellers from predecessors in interest to the Assets, but not
including those Environmental Liabilities, if any, contractually
assumed from other third parties, unless such Environmental
Liabilities contractually assumed from other third parties are
described in the Existing Environmental Liabilities or the
documents incorporated by reference therein), including without
limitation the Existing Environmental Liabilities, Environmental
Liabilities for remediation or cleanup on the Assets required by
any governmental entity to remove sources of Hazardous Substances
giving rise to tort claims described in Section 5.01(g)(v) and
(vi), and all Environmental Liabilities not expressly retained by
Seller pursuant to Section 5.01(g) or referred to in the
parenthetical in this Subsection 5.01(h).
5.02 PERSONNEL, EMPLOYMENT ARRANGEMENTS AND EMPLOYEE
BENEFITS.
(a) OFFERS OF EMPLOYMENT. Except for those employees
of BRC listed on Schedule 5.02(a), Buyer shall offer employment to
all hourly or salaried active, full time employees of BRC employed
in connection with the Businesses. The employees who accept offers
of employment by Buyer shall be referred to as "BUYER'S EMPLOYEES."
As soon as practicable after the date hereof, Sellers shall provide
Buyer with information as to the titles and current salaries with
respect to such employees, and Buyer and Sellers shall cooperate in
all aspects in effecting their change of employment as of the
Closing Date in an orderly fashion.
(b) BENEFITS.
(i) SELLERS' UNION DEFINED BENEFITS AND 401(K)
SAVINGS PLANS. Buyer shall have no liability whatsoever to the
Buyer's Employees or to Sellers with respect to accrued pension
benefits or any other benefits payable to such Buyer's Employees
under the Bloomfield Refining Company Union Employee's Defined
Benefits and 401(k) Savings Plans, and Sellers warrant there are no
and have not been any multiemployer plans within the meaning of
Section 4001(a)(3) of ERISA.
(ii) SELLERS' NON-UNION RETIREMENT PLAN. Buyer
shall have no liability whatsoever to the Buyer's Employees or to
Sellers with respect to any benefits payable to such Buyer's
Employees under the non-union Gary Tax Advantaged Savings Program
and Profit Sharing Plan.
(iii) UNUSED VACATION. Sellers will pay out
directly to each Buyer's Employee any accrued unused vacation time
as of the Closing Date.
(iv) ONGOING BENEFITS. Except as provided in any
contract between Buyer and any labor organization in connection
with any Buyer's Employees, all Buyer's Employees shall receive
from Buyer substantially the same employee benefits as Buyer's
current employees are receiving, including health, disability and
other insurance, retirement accounts and vacation and sick leave,
with no waiting period for comparable benefits, and with credit for
years of service to Sellers for vesting purposes, in each case to
the extent permitted by Buyer's existing plans and programs.
(v) SELLERS' RESPONSIBILITY FOR EXISTING BENEFITS.
Buyer shall not be liable for any salaries, wages, commissions,
vacation and/or sick leave pay or other compensation or benefits
due Sellers' employees prior to the Effective Time, including, but
not limited to, any withdrawal liability imposed under ERISA as the
result of the cessation of any of Sellers' obligations to
contribute to any plan subject to ERISA. Sellers shall remain
liable for and pay all amounts due their employees under any
pension, vacation, 401(k) savings, profit sharing, retirement,
severance, bonus, stock option, stock purchase, restricted stock,
incentive, deferred compensation, medical, dental, life insurance,
supplemental retirement or other benefit plans, programs, or
arrangements (including any such plans, programs or arrangements
contained in any employment or collective bargaining contract or
agreement). Sellers agree to remain solely responsible and liable
for any claims or demands made by their employees arising or
resulting from facts or circumstances occurring during their
employment by Sellers. Sellers hereby agree to indemnify, save and
hold harmless Buyer for, from and against any and all Loss
associated in any way with the matters set forth in this Section
5.02(b).
(c) COOPERATION OF THE PARTIES. Sellers and Buyer
agree to fully cooperate with respect to each of the calculations
necessary to effect the transactions contemplated by this Section.
(d) EMPLOYEE RIGHTS. Nothing herein expressed or
implied shall confer upon any employee of Sellers, any Buyer's
Employee or any other employee or legal representatives thereof any
rights or remedies, including any right to employment, or continued
employment for any specified period, of any nature or kind
whatsoever under or by reason of this Agreement.
(e) COBRA AND HEALTH CLAIM DATA. Sellers shall provide
all notices and fulfill all of their obligations, if any, under
Section 4980B(f)(6) of the Code with respect to the Buyer's
Employees. Prior to Closing, Sellers shall provide Buyer
information with respect to all accident, workers' compensation and
disability claims filed by each of Sellers' employees (including
information respecting the total number of claims filed, the total
amount of benefits claimed and the total amount of benefits paid)
during the eighteen-month period immediately preceding the delivery
of such information to Buyer.
(f) WAGE REPORTING. Wages paid by Sellers to Buyer's
Employees during 1995 shall be considered attributable to Buyer for
purposes of Section 3121(a)(1) of the Code and Section
31.3121(a)(1)-1(b) of the Treasury Regulations. Buyer shall
furnish each Buyer's Employee one statement of Income Tax Withheld
on Wages (IRS Form W-2) for wages paid by Sellers and Buyer. Buyer
shall file IRS Forms W-2 and W-3 covering Buyer's Employees with
the Social Security Administration for wages paid and withheld by
Sellers and Buyer during 1995. Both parties shall comply with the
provisions of Section 5 of Rev. Proc. 84-77. Sellers shall provide
Buyer computer information as soon as practicable relative to wages
paid to Buyer's Employees prior to the Closing Date to permit Buyer
to comply with this Subsection. Sellers and Buyer do not intend by
this Subsection 5.02(f) to relieve Sellers of the obligation to pay
and/or withhold any wages for any of Buyer's Employees up to the
Effective Time.
(g) UNEMPLOYMENT COMPENSATION. Prior to the Closing
Date, if requested by Buyer, Buyer and Sellers shall jointly make
application to the New Mexico Department of Labor to transfer
Sellers' New Mexico unemployment compensation experience rating as
of the Closing Date.
5.03 CASUALTY LOSS. If, prior to the Closing, all or any
portion of the Assets shall be destroyed by fire or other casualty,
or if any portion of the Assets shall be taken in condemnation or
under the right of eminent domain, or if proceedings for such
purposes shall be pending or threatened, the effect of which would
have a Material Effect, Buyer or Sellers may elect to terminate
this Agreement. If Buyer or Sellers shall so elect, neither party
shall have any further obligation to the other hereunder. If not
so terminated or if there is no Material Effect, this Agreement
shall remain in full force and effect notwithstanding any such
destruction or taking, and Sellers shall repair or replace that
portion of the Assets damaged or destroyed by fire or other
casualty prior to the Closing and, in the event of a taking under
condemnation or under the right of eminent domain, Sellers shall at
the Closing pay to Buyer all sums paid to Sellers by reason of such
taking, and Sellers shall assign, transfer and set over unto Buyer
all of the right, title and interest of Sellers in and to any
unpaid awards or other payments arising out of such taking.
5.04 TAXES DUE WITH RESPECT TO TRANSFER OF ASSETS. Buyer and
Sellers believe that there are no sales or other transfer taxes
("TRANSFER TAXES") applicable as a result of the transfer of the
Assets to Buyer pursuant to this Agreement. If there are any such
Transfer Taxes, Buyer shall be obligated to pay such taxes or
reimburse Sellers for Sellers' payment of such taxes.
5.05 PROPERTY TAX PRORATION AMOUNT. Unpaid state and local
ad valorem, property and similar taxes and assessments, common area
charges and assessments, utility charges, and rent under leases or
subleases applicable to the Assets shall be apportioned as of the
Effective Time. The "PROPERTY TAX PRORATION AMOUNT" shall be the
amount of the foregoing which have accrued for periods preceding
the Effective Time, but which have not been paid. The calculation
of the Property Tax Proration Amount shall be based on the best
information relating to the items covered thereby available
immediately prior to the Closing Date. The Property Tax Proration
Amount as so determined shall be final between the parties and the
Base Purchase Price shall be adjusted therefor as provided in
Section 2.05.
5.06 LIKE-KIND EXCHANGE. If requested by Sellers, Buyer will
cooperate with Sellers to accommodate a like-kind exchange under
Section 1031 of the Code with respect to the Assets or any portion
thereof. Such cooperation shall include, without limitation, the
execution of certain documents in connection with such like-kind
exchange, but Buyer shall not have to assume any additional
liabilities or obligations in connection therewith. Sellers shall
have the right, without the consent of Buyer, to assign all or any
portion of their interests in the Assets and their rights and
obligations under this Agreement to a third party designated by
Sellers for purposes of facilitating such like-kind exchange.
Sellers shall indemnify, save and hold harmless Buyer for, from and
against any and all costs, expenses, liabilities, fines, penalties,
and demands for damages associated in any way with the like-kind
exchange or the third-party's property to be exchanged and the
breach of all warranties, obligations and duties of "Sellers" under
this Agreement and the Transfer Documents.
5.07 DUE DILIGENCE. Immediately upon execution of this
Agreement, and subject to Section 5.01(b) and (c), Sellers shall
give to Buyer full access during normal business hours to all
information as provided in Section 4.01(a) in order to allow Buyer
to inspect, test, and examine the Assets and the Businesses prior
to the Closing and in order to assist Buyer in determining if any
matter or event may constitute a Material Effect.
ARTICLE VI
CONDITIONS TO CLOSING
6.01 CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of
Sellers to consummate the transactions provided for in this
Agreement are subject, at the option of Sellers, to the
satisfaction or waiver of the following condition: All
representations and warranties of Buyer contained in this Agreement
shall be true in all respects at and as of the Closing as if such
representations and warranties were made at and as of the Closing,
and Buyer shall have performed and satisfied in all material
respects all covenants and agreements required by this Agreement to
be performed and satisfied by Buyer at or prior to the Closing.
6.02 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of
Buyer to consummate the transactions provided for in this Agreement
are subject, at the option of Buyer, to the satisfaction or waiver
of the following conditions:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties of Sellers contained in this
Agreement shall be true in all respects at and as of the Closing as
if such representations and warranties were made at and as of the
Closing, and Sellers shall have performed and satisfied in all
material respects all covenants and agreements required by this
Agreement to be performed and satisfied by Sellers at or prior to
the Closing.
(b) NO STATUTE OR REGULATION. No state or federal
statute or regulation shall have been proposed or adopted that
would result in a Material Effect or that would adversely affect
the Assets, the Businesses or Buyer's ability to own and operate
the Assets in substantially the same way as they are now operated
and as they have been operated on an historical basis.
(c) TITLE. Subject to Permitted Exceptions, and the
Refinery Site Encumbrances, Sellers' title to the Refinery Assets
shall be good and marketable. Subject to Permitted Exceptions,
Sellers' title to the Pipeline Assets shall be such as to allow
Buyer to enjoy the use and operation thereof as they are now
operated by Sellers and as they have been operated on an historical
basis, free of any claims of third parties.
(d) PERMITS AND LICENSES. All material Permits and
Licenses necessary for Buyer to own and operate the Assets and the
Businesses in accordance with Laws and Environmental Laws and as
they are now owned and operated by Sellers and as they have been
owned and operated on a historical basis, shall have been
transferred to Buyer without modifications, amendments, or
additional costs, financial obligations or other requirements that
would have a Material Effect, or Buyer shall have received
replacement or substitute Permits and Licenses or other
arrangements have been made to give Buyer substantially the same
benefits, without modifications, amendments or additional costs,
financial obligations or other requirements that would have a
Material Effect.
(e) CONTRACTS. Except for the Excluded Contracts, all
material contracts, agreements, leases of personal property and
leases of real property, and any consents required from any Person
in connection with the assignment thereof, necessary for Buyer to
own and operate the Assets and the Businesses as they are now owned
and operated by Sellers and as they have been owned and operated on
an historical basis, shall have been transferred to Buyer without
modifications, amendments, or additional costs, financial
obligations or other requirements that would have a Material
Effect, or Buyer shall have received replacement or substitute
contracts, agreements, leases of personal property and leases of
real property for such material contracts, agreements, leases of
personal property and leases of real property, respectively, or
other arrangements have been made to give Buyer substantially the
same benefits, without modifications, amendments or additional
costs, financial obligations or other requirements that would have
a Material Effect.
(f) CONDITION AND REPAIR OF REFINERY FACILITIES AND
REFINERY PERSONAL PROPERTY. The Refinery shall be operating in
the ordinary course and shall be capable of operating at its rated
capacity. The Refinery Facilities and Refinery Personal Property
shall be in good condition and repair and shall have been
maintained in as good and effective operating condition as they
would be kept and maintained by a prudent operator; and the
Refinery Facilities and Refinery Personal Property shall be in
compliance with all Laws, the failure of which compliance would
have a Material Effect.
(g) CONDITION AND REPAIR OF PIPELINE FACILITIES AND
PIPELINE PERSONAL PROPERTY. Subject to those matters known to
Buyer as a result of Buyer's ownership interest in the Pipeline and
taking into consideration the age and use of the Pipeline, the
Pipeline Facilities and Pipeline Personal Property shall be in good
condition and repair and shall have been maintained in as good and
effective operating condition as they would be kept and maintained
by a prudent operator; and the Pipeline Facilities and Pipeline
Personal Property shall be in compliance with all Laws, the failure
of which compliance would have a Material Effect.
(h) RESULTS OF DUE DILIGENCE. Buyer's inspection,
testing and examination of the Assets and the Businesses conducted
pursuant to Section 5.07 shall not have revealed any matter which,
in the reasonable judgment of a comparable industry third party
purchasing assets and businesses comparable to the Assets and
Businesses, would, alone or in the aggregate, cause such a third
party not to purchase the Assets for reasons other than changes or
conditions in the industry and in markets.
(i) WATER RIGHTS. Buyer shall have received an
assignment, and all required consents thereto, of a fully executed,
valid and effective contract between Sellers and the United States
Bureau of Reclamation in the form set forth in Schedule 6.02(i),
and, in addition, a comparable industry third party purchasing
assets and businesses comparable to the Assets and Businesses would
in its reasonable judgment determine, following due diligence
review as provided in Section 5.07, that an assured water supply,
at a cost not materially exceeding historical costs, will be
available in the immediate future through a valid and enforceable
contract with a term of not less than 10 years with a local
municipality for delivery of water through the Refinery's existing
delivery point(s) in an amount sufficient to operate the Refinery
as it is now operated by Sellers and has been operated by Sellers
on an historical basis. If such an assured water supply is not
immediately available, Sellers and Buyer shall together in good
faith attempt to determine if other mutually satisfactory
assurances of adequate long-term supply are available. The water
rights described on Schedule 3.01(l) shall have, in the past,
provided the Refinery with an adequate water supply to operate in
the ordinary course of business without interruption or shut down
and without objections, litigation, threatened litigation or
similar claims, except as set forth on such Schedule. The water
rights granted by the contract with the United States Bureau of
Reclamation described above, together with the "Owned Rights"
described on Schedule 3.01(l), shall be sufficient to allow Buyer
to operate the Refinery as it is currently being operated and as it
has been operated on a historical basis; and except as set forth in
such Schedule, there shall be no objections, threatened objections,
complaints, litigation, threatened litigation or other matters with
respect to, limiting or affecting the continued use of such water
by Buyer.
(j) COLLECTIVE BARGAINING AGREEMENT. Buyer shall have
entered into an agreement(s) with those labor organizations, or
successors thereto, that are parties to the collective bargaining
agreements set forth in Exhibit 3.01(k) containing terms and
conditions no more onerous than those contained in said collective
bargaining agreements in any material respect.
(k) APPROVAL OF WATER USAGE. The New Mexico State
Engineer Office shall have approved the continued removal of
groundwater in connection with environmental remediation activities
at the Refinery and said approval shall not unreasonably restrict
the amount of groundwater that may be removed for such purpose
after the Effective Time, or Buyer shall have received from
Montgomery & Andrews, New Mexico legal counsel to Buyer, reasonable
assurances to the effect that lack of such approval will not have a
material adverse effect on such remediation activities.
(l) INTANGIBLE PROPERTY. Buyer shall have obtained all
material Intangible Property necessary to own and operate the
Assets and the Businesses as they are now operated and as they have
been operated on an historical basis. The continued operation of
the Refinery Business and the Pipeline Business and the use of such
Intangible Property and the Licenses shall not infringe any valid
patent, copyright, tradename or other right held by any third party
in any material respect. No claim by any third party contesting
the validity, enforceability, use or ownership of the Intangible
Property or Licenses shall have been threatened or outstanding.
(m) NO VIOLATION. No oral or written notice, citation,
order or judgment shall have been issued, no penalty shall have
been assessed, and no investigation or review shall be pending or
threatened by any Person with respect to any alleged material
violation of any Laws or Environmental Laws (other than as
disclosed as an Existing Environmental Liability), or with respect
to any alleged failure to have any material Licenses or Permits in
connection with the Assets or the Businesses.
(n) VALIDITY OF CONTRACTS. All material Contracts and
leases of real property (i) shall be in full force and effect, (ii)
shall be legal, valid, binding and enforceable in accordance with
their terms, and (iii) shall not be in default and no events have
occurred thereunder, which with the giving of notice or the passage
of time or both could cause any such Contract or leases of real
property to be in default. All monies due and performance required
under the terms of all material Contracts and leases of real
property through the Effective Date shall have been paid and
performed or Sellers will give adequate assurance that such will be
so paid and performed.
(o) CONDEMNATION. There shall be no material
condemnation, expropriation, eminent domain, or similar proceeding
pending or threatened affecting any of the Assets.
(p) COSTS RELATING TO ENVIRONMENTAL LIABILITIES. The
costs and expenses of Buyer to comply with Environmental Laws and
to pay, perform, fulfill and discharge Environmental Liabilities
would not, in the reasonable judgment of a comparable industry
third party purchasing assets and businesses comparable to the
Assets and Businesses, be materially increased over the historical
costs incurred by Sellers in connection therewith.
(q) REASSESSMENTS AND REEVALUATIONS. There shall have
been no proposed reassessments or reevaluations of any of the
Assets, any imposition of additional assessments or special
assessments, or any other proposals that would increase the amount
of any taxes relating to the Assets or the Businesses, that would
have a Material Effect.
(r) PROFIT AND LOSS STATEMENTS. Prior to Closing
Sellers shall have provided to Buyer profit and loss statements for
BRC for each month subsequent to May, 1995 as is normally
available.
(s) COMPLIANCE WITH ENVIRONMENTAL LAWS. Except for the
Existing Environmental Liabilities, the Assets, the Businesses and
the ownership and operation thereof as they are currently being
owned and operated and as they have been owned and operated on an
historical basis and all Refined Products produced thereby shall be
in compliance with all Environmental Laws, the failure of which
compliance could have a Material Effect.
(t) CRUDE OIL CONTRACTS. All contracts for the
purchase or supply of crude oil identified by Sellers in Schedule
3.02(g) shall have been transferred to Buyer without any material
modifications, amendments, or additional costs, financial
obligations or other requirements or Buyer shall have received
replacement or substitute contracts or other arrangements have been
made to give Buyer substantially the same benefits, without
material modifications, amendments, or additional costs, financial
obligations or other requirements.
(u) OSHA MATTERS. Except as referred to in Section
3.01(h), all requirements of the Occupational Safety and Health Act
and the regulations promulgated thereunder, and all requirements of
any similar laws or regulations of any state, tribal or local
jurisdiction (the "OSHA REQUIREMENTS") relating to the Assets, the
Businesses or the ownership or operation thereof as they are now
owned and operated, and as they have been owned and operated on an
historical basis, shall have been complied with in all material
respects. Sellers shall have not received any citation or other
notice of alleged violation of OSHA Requirements from the
Occupational Safety and Health Administration or any comparable
administration of any state, tribal or local jurisdiction (an
"ADMINISTRATION") or any Administration inspector setting forth any
respect in which the Assets, the Businesses, or the ownership or
operation thereof is not in compliance with OSHA Requirements,
which noncompliance shall not have been corrected or remediated to
the satisfaction of such Administration or inspector.
(v) CONVENTIONAL GASOLINE/ANTI-DUMPING. Subject to
averaging in accordance with 40 C.F.R. Part 80, Subpart E, all
gasoline produced at the Refinery shall be in compliance with the
anti-dumping provisions, including conventional gasoline standards
and blendstock controls, of the Clean Air Act and the regulations
promulgated thereunder, including 40 C.F.R. Part 80, Subpart E (the
"ANTI-DUMPING REQUIREMENTS"), and the Refinery is capable of
producing gasoline which complies with the Anti-Dumping
Requirements, without any limitation on existing gasoline
production capacity, utilizing the Refinery's existing
configuration and existing Feedstock quality.
(v) MATERIAL STATEMENTS. No information provided by
Sellers shall have contained any untrue statement of a material
fact or omitted to state a material fact necessary to make the
statements contained therein not misleading. There shall have been
no material adverse fact known to Sellers and unknown to Buyer
relating to the Assets or the Businesses which has not been
disclosed to Buyer.
(w) PERMITS AND LICENSES. The Permits and Licenses
shall have been entered into by Sellers in the ordinary course of
business and shall contain terms and conditions customary in the
industry for similar types of instruments.
(x) CONTRACTS. The Contracts shall have been entered
into by Sellers or Affiliates in the ordinary course of business in
arm's length transactions and shall contain terms and conditions
customary in the industry for similar types of instruments.
(y) CONSENTS. All material final consents, approvals,
orders and authorizations of any Person required in connection with
the consummation of the transactions herein contemplated, the
transfer of the Assets to Buyer or the ownership, operation or use
of the Assets and the Businesses as they are now operated or used
and as they have been operated or used on an historical basis
(including but not limited to any preferential rights to purchase
or consents to assignments), shall have been obtained without
conditions which would result in a Material Effect, or, if such
consents are customarily obtained subsequent to such transfer, such
consents will be forthcoming in the ordinary course without
resulting in a Material Effect.
(z) BENEFIT PLANS. Each employee benefit plan
maintained by Sellers which is intended to meet the requirements
for tax-favored treatment under the Code or which is intended to be
qualified within the meaning of Section 401(a) of the Code, shall
have been administered in accordance with such requirements and
shall have received a favorable determination letter from the
Internal Revenue Service with respect thereto; and nothing shall
have occurred which would cause the loss of any such tax-favored
treatment or qualification. Each such plan shall have been amended
prior to the end of the Code's remedial amendment period to
incorporate all provisions required by the Tax Reform Act of 1986
and subsequent legislation.
(aa) UTILITIES. Buyer shall have access and the right
to use all gas, electricity and other utilities necessary or
historically used for the operation of the Assets and the
Businesses as they are currently being operated and as they have
been operated on a historical basis.
6.03 CONDITIONS TO OBLIGATIONS OF BOTH PARTIES. The
obligations of Sellers and Buyer to consummate the transactions
provided for in this Agreement are subject, at the option of each
party, to the satisfaction or waiver by both parties of the
following conditions:
(a) NO ACTION OR PROCEEDINGS. There shall not be
pending or instituted, threatened or proposed, any suit, action,
investigation, material dispute or other proceeding by or before
any court, arbitrator or governmental agency or any other Person
affecting, relating to, challenging or complaining of, or seeking
to collect damages or other relief in connection with, the
transactions provided for in this Agreement, the Assets or the
Businesses.
(b) H-S-R ACT. The waiting period applicable under the
H-S-R Act shall have been terminated or shall have expired, no
litigation shall be pending or threatened with respect to any
antitrust issue, and the Closing shall then be permitted to occur
without violation of the H-S-R Act.
(c) NO STATUTE, RULE, REGULATION OR ACTION. No state
or federal statute, rule, regulation or action shall exist or be
proposed, pending, or threatened, or shall have been adopted or
taken and no judicial or administrative decision shall have been
entered (whether on a preliminary or final basis), that would
prohibit, restrict or delay the consummation of the transactions
provided for in this Agreement or make illegal the payments due
hereunder.
(d) PRELIMINARY SETTLEMENT STATEMENT. Sellers and
Buyer shall have agreed upon a settlement statement (the
"PRELIMINARY SETTLEMENT STATEMENT") that shall set forth the
Preliminary Amount (as hereinafter defined) and each adjustment and
the calculation of such adjustments used to determine such amount.
The term "PRELIMINARY AMOUNT" shall mean the Base Purchase Price
adjusted as provided in Section 2.05 using for such adjustment the
best information then available.
ARTICLE VII
CLOSING
7.01 DATE OF CLOSING. Subject to the conditions stated in
this Agreement, the consummation of the transactions contemplated
by this Agreement (the "CLOSING") shall be held on August 31, 1995,
provided, however, if all conditions to Closing set forth in
Article VI have not been satisfied or waived by such date, the
Closing shall occur within three business days after such
conditions shall have been met or waived. The date Closing
actually occurs shall be referred to as the "CLOSING DATE."
7.02 PLACE OF CLOSING. The Closing shall be held at the
offices of Holme Roberts & Owen LLC, Suite 4100, 1700 Lincoln,
Denver, Colorado, or at such other place as Buyer and Sellers may
agree upon in writing.
7.03 CLOSING OBLIGATIONS. At the Closing the following
events shall occur, each being a condition precedent to the others
and each being deemed to have occurred simultaneously with the
others:
(a) TRANSFER DOCUMENTS. Sellers (and, if necessary,
Affiliates of Sellers) shall execute, acknowledge and deliver, and
Buyer shall execute, acknowledge and accept delivery of, the
following transfer documents (the "TRANSFER DOCUMENTS"):
(i) General Deed, Assignment, Bill of Sale and
Assumption, covering all of the Assets; guarantees and warranties
on equipment and fixtures; claims against UST funds for
Environmental Liabilities assumed by Buyer; and as to any matters
for which Buyer has assumed any liability or obligation, any
claims, defenses, warranties of title and rights to indemnity
which Sellers have or to which they are entitled from the parties
from whom Sellers acquired the Assets or Sellers' predecessors in
interest; substantially in the form of Exhibit B;
(ii) Bill of Sale, covering the Refinery Equipment,
Refinery Facilities, Refinery Inventory, and Pipeline Inventory
warranting to Buyer good title free and clear of all liens, claims,
liabilities, encumbrances or rights or interests of any third party
whatsoever, subject to Permitted Exceptions, substantially in the
form of Exhibit C;
(iii) Assignment and Conveyance covering the
Refinery Real Property (other than the Refinery Site and the
fixtures that are real property under applicable state law located
thereon), if any, containing a special warranty of title against
liens and security interests created by, through or under Seller,
subject to Permitted Exceptions, substantially in the form of
Exhibit D;
(iv) General Warranty Deed, covering the Refinery
Site and the fixtures that are real property under applicable state
law located thereon, containing a general warranty of title,
subject to Permitted Exceptions and the Refinery Site Encumbrances,
substantially in the form of Exhibit E (if deemed necessary by
Buyer, this Transfer Document will be recorded in the real property
records of San Juan County, New Mexico, concurrently with the
Closing);
(v) Bill of Sale, covering all of Sellers' right,
title and interest in the Pipeline Equipment and Pipeline
Facilities, containing a special warranty of title against liens
and security interests created by, through or under Sellers,
subject to Permitted Exceptions, substantially in the form of
Exhibit F; and
(vi) Assignment and Conveyance covering all of
Sellers' right, title and interest in the Pipeline Real Property,
containing a special warranty of title against liens and security
interests created by, through or under Seller, subject to Permitted
Exceptions, substantially in the form of Exhibit G.
As appropriate, Sellers and Buyer shall also execute, acknowledge
and deliver (i) separate transfer documents for individual Assets
as may be required given the nature of an individual Asset, and
(ii) separate transfer documents of the Assets on officially
approved forms in sufficient counterparts to satisfy applicable
statutory and regulatory requirements. All such separate transfer
documents shall be deemed to contain all of the exceptions,
reservations, warranties, right, titles, powers and privileges as
are contained in the Transfer Documents.
(b) POSSESSION. Buyer shall be given exclusive
possession of the Refinery Assets, possession of the Pipeline
Assets and possession of the Records maintained at the Refinery
(and Buyer shall be entitled to retain copies of all Records
maintained by Sellers in Denver).
(c) LIEN RELEASES. Sellers shall deliver to Buyer
releases of liens and security interests (including termination of
financing statements relating thereto) necessary to transfer title
as provided herein.
(d) INDIVIDUALS' NONCOMPETE. Sellers shall cause to be
delivered to Buyer a covenant against competition executed by Sam
Gary and Ron Williams in form and substance as Section 8.08.
(e) GUARANTEE AND AGREEMENT. Buyer shall cause to be
delivered to Sellers a Guarantee and Agreement executed by GII in
form and substance as set forth in Exhibit H.
(f) PRELIMINARY SETTLEMENT STATEMENT. Sellers and
Buyer shall execute and deliver the Preliminary Settlement
Statement.
(g) PRELIMINARY AMOUNT. Buyer shall deliver the
Preliminary Amount to Sellers or to Sellers' account (such account
to be designated by Sellers at least two Business Days prior to the
Closing Date) by direct bank or wire transfer.
(h) SELLERS' CERTIFICATE. Sellers shall execute,
acknowledge and deliver to Buyer a Sellers' Certificate dated as of
the Closing Date in form and substance as set forth in Exhibit I.
(i) BUYER'S CERTIFICATE. Buyer shall execute,
acknowledge and deliver to Seller a Buyer's Certificate dated as of
the Closing Date in form and substance as set forth in Exhibit J.
(j) NON-FOREIGN STATUS CERTIFICATE. Each Seller shall
execute, acknowledge and deliver to Buyer a Non-Foreign Status
Certificate dated as of the Closing Date in form and substance as
set forth in Exhibit K.
(k) CRUDE OIL CONTRACT. Sellers and Buyer shall
execute and deliver a crude oil contract in form and substance as
set forth in Exhibit L.
ARTICLE VIII
OBLIGATIONS AFTER CLOSING
8.01 POST-CLOSING SETTLEMENT.
(a) FINAL SETTLEMENT STATEMENT. Within 60 days
following the Closing Date Sellers and Buyer SHALL PREPARE A
STATEMENT (THE "Final Settlement Statement") setting forth the Base
Purchase Price and each adjustment thereto as provided in Section
2.05 which was not finally determined as of the Closing. Sellers
and Buyer shall make available to the other party all books,
records and other information in their possession or control, and
the assistance of personnel who are familiar with same, as may be
reasonably requested in connection with the preparation of the
Final Settlement Statement.
(b) INABILITY TO AGREE TO FINAL SETTLEMENT STATEMENT.
The parties shall undertake in good faith to agree on the Final
Settlement Statement no later than 90 days after the Closing Date;
provided, if Buyer and Sellers shall be unable to agree on the
Final Settlement Statement within such 90-day period, then Ernst &
Young LLP, or such other nationally recognized public accounting
firm mutually acceptable to Buyer and Sellers, shall be engaged to
make its determination of the amount in dispute (and only such
amount). Each party shall bear and pay one-half of the fees and
other costs charged by such accounting firm.
(c) ACCOUNTING FIRM PROCEDURES. If any accounting firm
is engaged as provided in Subsection 8.01 (b) above, Sellers and
Buyer agree to provide such accounting firm with all books, records
and other information relevant to the determination of the amount
in dispute. In determining the amount in dispute, such accounting
firm shall be instructed to use a materiality standard as such firm
may determine to be reasonable under the circumstances, in light of
the cost to be incurred and the amount in issue. Such accounting
firm shall be instructed to make such calculations as soon as
practicable. The final determination of any adjustment of the Base
Purchase Price, pursuant to this Subsection 8.01(c) shall be
binding on the parties hereto.
(d) PAYMENT OF DIFFERENCE. The amount of the
difference between the Preliminary Amount paid by Buyer to Sellers
at the Closing and the amount as determined in accordance with this
Section, shall be paid by the appropriate party to the party to
whom it is owed within five Business Days after its final
determination in immediately available funds.
8.02 RECORDING FEES. Buyer shall pay all documentary, filing
and recording fees required in connection with the filing and
recording of the Transfer Documents and any separate transfer
documents executed pursuant to Subsection 7.03(a).
8.03 INDEMNIFICATION.
(a) BUYER'S INDEMNIFICATION OF SELLERS. From and after
the Closing Date, Buyer shall defend, indemnify and save and hold
harmless Sellers and Sellers' respective directors, officers,
shareholders, employees and agents against all Losses which arise
from or in connection with (i) any of the matters assumed by Buyer
pursuant to Subsection 5.01(h) or set forth in Section 8.04(b);
(ii) any breach of any covenant, agreement, representation or
warranty of Buyer contained herein; and (iii) claims or demands
asserted against any Seller, its directors, officers, shareholders,
employees and agents for injury to or death of persons or damage to
property arising in any way from Buyer's due diligence or Buyer's
Environmental Investigation, and any common law or statutory liens
or other encumbrances for labor or materials furnished in
connection with an Environmental Investigation.
(b) SELLERS' INDEMNITY OF BUYER. From and after the
Closing Date, Sellers shall defend, indemnify and save and hold
harmless Buyer and Buyer's directors, officers, shareholders,
employees and agents against all Losses which arise from or in
connection with (i) any of the matters retained or assumed by
Sellers pursuant to Subsection 5.01 (g) or set forth in Section
8.04(a); (ii) any breach of any covenant, agreement, representation
or warranty of Sellers contained herein ; and (iii) any breach of
any covenant, agreement, representation of warranty of Sellers in
any Transfer Document.
(c) CLAIMS FOR INDEMNIFICATION. Sellers and Buyer
shall with reasonable promptness notify the other party of the
making of any demand, the assertion of any claim, or the
commencement of any suit, action or proceeding by any third party
for which indemnity may be sought under this Agreement (an
"INDEMNITY OBLIGATION"). The party from whom indemnification is
sought (the "INDEMNIFYING PARTY") shall have the right, but not the
obligation, to assume the defense or settlement of any Indemnity
Obligation of which the party seeking indemnification (the
"INDEMNIFIED PARTY") gives notice; provided, however, that if the
Indemnifying Party does not elect to assume such defense or
settlement, the Indemnified Party shall have the right, but not the
obligation, to assume such defense or settlement, and the
Indemnifying Party shall at all times have the right, at its option
and expense, to participate fully therein. Each party shall have
reasonable access to the books, records and personnel in the
possession or control of the other party which are pertinent to the
defense or settlement of any Indemnity Obligation. The parties
shall cooperate in the defense or settlement of any Indemnity
Obligation, but the party electing to assume such defense or
settlement shall have full authority to determine all action to be
taken with respect thereto. The Indemnified Party may join the
Indemnifying Party in any suit, action or proceeding to which any
such right of indemnity created by this Agreement would or might
apply, for the purpose of enforcing any such right.
(d) INDEMNIFICATION THRESHOLD. Notwithstanding
anything contained herein to the contrary, neither Sellers nor
Buyer shall be liable for Losses pursuant to the indemnification
obligations set forth in Section 8.03(a) and (b) unless the amount
of Losses for which Sellers or Buyer, as the case may be, would be
liable, but for the provisions of this Subsection 8.03(d), exceeds
$25,000 for any individual Loss or $125,000.00 on an aggregate
basis for all such Losses, but they shall retain full liability for
all other covenants and obligations. The limitation in the
foregoing sentence shall apply to Environmental Liabilities.
8.04 ASSUMPTION OF OBLIGATIONS.
(a) SELLERS' OBLIGATION. In addition to the
obligations retained or assumed by Sellers elsewhere in this
Agreement, and except as otherwise provided in Section 5.01,
Sellers shall remain liable and responsible for all claims, costs,
expenses, liabilities and obligations of any kind or nature,
whether known or unknown, arising from or in any manner relating to
the existence, ownership, operation or maintenance of the Assets,
the conduct of the Businesses, or any activity of the Sellers
(including without limitation obligations arising under the
Transferable Permits and Licenses, and the Contracts) attributable
to periods prior to the Effective Time.
(b) BUYER'S OBLIGATIONS. In addition to the
obligations assumed by Buyer elsewhere in this Agreement, and
except as otherwise provided in Section 5.01, Buyer shall be liable
and responsible for all claims, costs, expenses, liabilities and
obligations of any kind or nature, whether known or unknown,
arising from or in any manner relating to the ownership or the
operation of the Assets, the conduct of Buyer's business, or any
activity of Buyer (including without limitation obligations arising
under the Transferable Permits and Licenses, and the Contracts)
attributable to periods after the Effective Time.
8.05 IDENTIFICATIONS, SIGNS, TRADEMARKS AND TRADENAMES.
Within a reasonable time after Closing, but in no event later than
90 days after the Closing Date, Buyer at its sole cost, risk and
expense shall remove from the Assets any and all signs or other
items that display or exhibit the name of Sellers or their
Affiliates, or the trademarks or tradenames of Sellers or their
Affiliates. In the conduct of its business and otherwise, Buyer
shall not use any of the foregoing and shall not represent, state
or otherwise infer in any manner, directly or indirectly, to any
party that Buyer is acting on behalf of or as a representative or
agent of, or in any way associated with Sellers. Furthermore,
Purchaser shall not use the names "Bloomfield Refining Company,"
"Gary-Williams Energy Corporation," "Bloomfield" or "Gary-Williams"
or, with the exception of "Bloomfield Refinery," any combination
thereof or any abbreviation thereof in connection with the use and
operation of the Assets.
8.06 ACCESS TO RECORDS - BOOKS AND RECORDS. Sellers shall
have the right to make copies of any of the Records located at the
Refinery which they desire to retain prior to delivering such
Records to Buyer at the Closing, and Buyer shall be entitled to
make copies of any Records maintained by Sellers in Denver prior to
Closing. For a period of seven years after the Closing Date, Buyer
shall permit Sellers and their authorized representatives to have
reasonable access to any Records received from Sellers remaining
from time to time in Buyer's possession; and Sellers shall permit
Buyer and its authorized representatives to have reasonable access
to any Records retained by Sellers remaining from time to time in
Sellers' possession.
8.07 WAIVER OF COMPLIANCE WITH BULK SALES LAWS. Buyer hereby
waives compliance by Sellers with the provisions of any applicable
bulk sales act, and Sellers hereby agree to indemnify Buyer from
any Losses resulting therefrom.
8.08 COVENANT AGAINST COMPETITION. Sellers covenant and
agree that they shall not at any time within the five year period
immediately following the Closing Date engage in, finance, assist,
or have any ownership or interest of any kind, directly or
indirectly in any Person that engages in, anywhere within a 175
mile radius of Bloomfield, New Mexico, all or any part of the
Businesses or any business related thereto (other than retail
marketing of Refined Products, and exchanges and buying and selling
of Refined Products relating to the retail marketing of Refined
Products) including without limitation the purchasing or gathering
of crude oil, the refining of crude oil or the marketing of Refined
Products (other than retail marketing of Refined Products, and
exchanges and buying and selling of Refined Products relating to
the retail marketing of Refined Products); provided, however, that
Sellers may own, directly or indirectly, as an investment,
securities of any Person which are publicly traded if Sellers do
not, directly or indirectly, own five percent or more of any class
of securities of such Person. Except as provided in this Section,
neither Sellers nor Buyer agree to otherwise refrain from any other
competitive activities.
8.09 INDEPENDENT EVALUATION. Buyer is experienced and
knowledgeable in the refinery and pipeline businesses and is aware
of their risks. To the extent Buyer deems appropriate, Buyer will
examine all materials made available by Sellers with respect to the
Assets (the "BACKGROUND MATERIALS"). The Background Materials are
files, or copies thereof, that Sellers have used in its normal
course of business and other information about the Assets that
Sellers have compiled or generated; however, Buyer acknowledges and
agrees that, except as otherwise set forth herein, Sellers have
made no representations or warranties, express or implied, written
or oral, as to the accuracy or completeness of the Background
Materials or any other information relating to the Assets furnished
or to be furnished to Buyer or its representatives by or on behalf
of Sellers. Buyer expressly assumes the risk of (i) future changes
in the world price for crude oil, (ii) future changes in prices
that may be received for refined and other products, (iii) future
changes in the volumes of products refined at the Refinery, (iv)
future changes in the volumes of products being transported through
the Pipeline, and the rates received therefor, and (v) future
changes in levels of production from the oil and gas leases and
wells supplying the Refinery and the Pipeline (whether expected or
unexpected declines or complete cessation of production).
8.10 FURTHER ASSURANCES. Sellers and Buyer shall execute,
acknowledge and deliver or cause to be executed, acknowledged and
delivered such instruments and take such other action as may be
reasonably necessary or advisable to carry out their obligations
under this Agreement and under any Exhibit, Schedule, document,
certificate or other instrument delivered pursuant hereto.
8.11 TITLE REPRESENTATIONS. Upon delivery of the Assignment
and Conveyance delivered pursuant to 7.03(a)(iii) and the General
Warranty Deed delivered pursuant to Section 7.03(a)(iv), GWEC
agrees to guarantee to Buyer the title warranties of BRC contained
therein.
ARTICLE IX
TERMINATION OF AGREEMENT
9.01 TERMINATION. This Agreement and the transactions
provided for herein may be terminated in the following instances:
(a) By either Buyer or Sellers if any condition set
forth in Section 6.03 above shall not be satisfied at the Closing.
(b) By Buyer if any condition set forth in Section 6.02
above shall not be satisfied on or before October 1, 1995.
(c) By Sellers if any condition set forth in Section
6.01 above shall not be satisfied on or before October 1, 1995, or,
if the Closing has not occurred, upon the later of 40 days after
the date of this Agreement or 10 days after the waiting period
applicable under the H-S-R Act has terminated or expired, but in no
event earlier than August 31, 1995.
(d) By either Buyer or Sellers if, in response to such
party's filing under the H-S-R Act, the Federal Trade Commission or
the Department of Justice makes a written request of such party for
additional information and the compliance with such request would
in such party's reasonable judgment cause an out-of-pocket
expenditure to such party in excess of $200,000 or would, in the
reasonable judgment of a comparable industry third party selling or
purchasing assets and businesses comparable to the Assets and
Businesses be otherwise unduly burdensome.
(e) By either Buyer or Sellers if as of 60 days
following the date of this Agreement, all federal and state
regulatory clearances or approvals in connection with the H-S-R Act
which are required to be granted prior to Closing have not been
received.
(f) By the mutual written agreement of Buyer and
Sellers.
This Agreement shall terminate without any further
action by Sellers or Buyer if the Closing has not occurred on or
before October 1, 1995.
9.02 RETURN OF INFORMATION. If this Agreement is terminated
pursuant to Section 9.01 above or terminated under any other
provision of this Agreement, Buyer shall return to Sellers all
written information and material delivered to Buyer by Sellers
pursuant to the terms of this Agreement, and such information shall
remain subject to the terms of the Confidentiality Agreement.
9.03 EFFECT OF TERMINATION. The following provisions shall
apply in the event of a termination of this Agreement:
(a) NON-WILLFUL FAILURE. If this Agreement is
terminated by Buyer or Sellers as permitted under Section 9.01
hereof and not as a result of the willful failure of any party to
perform any of its obligations hereunder, such termination shall be
without liability to any party to this Agreement or on the part of
any shareholder, director, officer, employee, agent or
representative of such party;
(b) WILLFUL FAILURE. If this Agreement is terminated
as a result of the willful failure of a party to perform any of its
obligations hereunder, such non-performing party shall be fully
liable for any and all damages, costs and expenses (including,
without limitation, reasonable attorney's fees) sustained or
incurred by such other party;
(c) REMEDY FOR THE NON-SATISFACTION OF BUYER'S
CONDITIONS. Notwithstanding anything contained herein to the
contrary, if the conditions to Buyer's obligations to purchase the
Assets as set forth in Section 6.02 are not satisfied other than as
a result of Sellers' willful failure to perform any of their
obligations hereunder, Buyers sole and only remedy is to terminate
this Agreement without liability to Sellers; and
(d) SURVIVAL. Sellers and Buyer hereby agree that the
provisions of this Section 9.03 shall survive any termination of
this Agreement.
ARTICLE X
MISCELLANEOUS
10.01 EXPENSES. Except as otherwise specifically provided in
this Agreement, all fees, costs and expenses incurred by Buyer or
Sellers in negotiating this Agreement or in consummating the
transactions contemplated by this Agreement shall be paid by the
party incurring the same, including without limitation, legal and
accounting fees, costs and expenses.
10.02 NOTICES. All notices and communications required or
permitted under this Agreement shall be in writing and shall be
delivered by established overnight delivery service, fax, by hand
or by registered or certified mail, postage prepaid, addressed as
follows:
If to Sellers:
Bloomfield Refining Company
Gary-Williams Energy Corporation
370 Seventeenth Street, Suite 5300
Denver, Colorado 80202
Attention: David J. Younggren, Senior Vice President
Fax No.: 303/628-3834
With copies to:
Bloomfield Refining Company
Gary-Williams Energy Corporation
370 Seventeenth Street, Suite 5300
Denver, Colorado 80202
Attention: James W. Greene, Esq.
Fax No.: 303/628-3833
and
Holme Roberts & Owen LLC
Suite 4100
1700 Lincoln
Denver, Colorado 80203
Attention: Lynn P. Hendrix, Esq.
Fax No.: 303/866-0200
If to Buyer:
Giant Industries Arizona, Inc.
23733 North Scottsdale Road
Scottsdale, Arizona 85255
Attention: Fredric L. Holliger
Fax No.: 602/585-8894
With copies to:
Giant Industries Arizona, Inc.
23733 North Scottsdale Road
Scottsdale, Arizona 85255
Attention: A. Wayne Davenport
Fax No.: 602/585-8894
Giant Industries Arizona, Inc.
23733 North Scottsdale Road
Scottsdale, Arizona 85255
Attention: Morgan Gust, Esq.
Fax No.: 602/585-8985
All notices and communications shall be effective upon the earlier
of actual receipt or, if delivered by mail, seven days after being
deposited in the mail, postage prepaid and addressed as required by
this Section. Either party may, by written notice so delivered to
the other, change the address to which delivery shall thereafter be
made.
10.03 AMENDMENT. This Agreement may not be altered or
amended, nor any rights hereunder be waived, except by an
instrument in writing executed by the party or parties to be
charged with such amendment or waiver. No waiver of any term,
provision or condition of this Agreement, in any one or more
instances, shall be deemed to be, or construed as, a further or
continuing waiver of any such term, provision or condition or as a
waiver of any other term, provision or condition of this Agreement.
10.04 ASSIGNMENT. Except as provided in Section 5.06,
neither Seller nor Buyer may assign any portion of its rights or
delegate any portion of its duties or obligations under this
Agreement without the prior written consent of the other party;
provided, however, that Buyer may, without the consent of Sellers,
assign all or any portion of its right to receive the Assets and
its rights and obligations under this Agreement to a wholly-owned
subsidiary but, in such event, Buyer shall remain liable for all
obligations and duties to Sellers under this Agreement.
10.05 ANNOUNCEMENTS. Sellers and Buyer shall consult with
each other with regard to all press releases and other
announcements concerning this Agreement or the transactions
provided for herein and, except as may be required by applicable
laws or the applicable rules and regulations of any governmental
agency or stock exchange, neither Buyer nor Sellers shall issue any
such press release or make any other announcement without the prior
written consent of the other party, which consent will not be
unreasonably withheld.
10.06 COUNTERPARTS. This Agreement may be executed by Buyer
and Sellers in any number of counterparts, each of which shall be
deemed an original instrument, but all of which together shall
constitute but one and the same instrument. This Agreement shall
become operative when each party has executed at least one
counterpart of this Agreement This Agreement may be delivered by
facsimile or similar transmission evidencing execution, and this
Agreement so delivered shall be effective as a valid and binding
agreement between the parties for all purposes.
10.07 GOVERNING LAW. This Agreement and the transactions
contemplated hereby shall be construed in accordance with, and
governed by, the laws of the State of New Mexico.
10.08 ENTIRE AGREEMENT. Except for the Confidentiality
Agreement (which shall remain in effect until the Closing occurs)
and the Common Undertaking Letter, this Agreement (including the
Exhibits and Schedules hereto) constitutes the entire understanding
between the parties with respect to the subject matter hereof and
supersedes all negotiations, prior discussions and prior agreements
and understandings relating to such subject matter. No
representation, warranty, covenant, agreement, promise, inducement
or statement, whether oral or written, has been made by Sellers or
Buyer that is not set forth in this Agreement or in the instruments
referred to herein, and neither Sellers nor Buyer shall be bound by
or liable for any alleged representation, warranty, covenant,
agreement, promise, inducement or statement not so set forth.
10.09 PARTIES IN INTEREST. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and,
except as otherwise prohibited, their respective successors and
assigns. Nothing contained in this Agreement, express or implied,
is intended to confer upon any other Person or entity any benefits,
rights or remedies.
Executed as of the date first above mentioned.
SELLERS:
BLOOMFIELD REFINING COMPANY,
a Delaware corporation
By: /S/ DAVID J. YOUNGGREN
-----------------------------------
David J. Younggren, Senior Vice President
GARY-WILLIAMS ENERGY
CORPORATION, a Delaware corporation
By: /S/ DAVID J. YOUNGGREN
-----------------------------------
David J. Younggren, Senior Vice President
BUYER:
GIANT INDUSTRIES ARIZONA, INC.,
an Arizona corporation
By: /S/ FREDRIC L. HOLLIGER
-----------------------------------
Fredric L. Holliger, Executive Vice President
EXHIBITS AND SCHEDULES TO
PURCHASE AND SALE AGREEMENT
Bloomfield Refining Company and Gary-Williams Energy Corporation,
as Sellers
and
Giant Industries Arizona, Inc., as Buyer
Dated as of August 8, 1995
These Exhibits and Schedules, when initialed in the spaces provided
below, constitute a part of the Purchase and Sale Agreement, dated
as of August 8, 1995 (the "Agreement"), among Bloomfield Refining
Company, a Delaware corporation and Gary-Williams Energy
Corporation, a Delaware corporation, as Sellers, and Giant
Industries Arizona, Inc. an Arizona corporation, as Buyer. Certain
capitalized terms used in these Exhibits and Schedules without
definition have the meanings specified in the Agreement.
SELLERS: BUYER:
BLOOMFIELD REFINING COMPANY GIANT INDUSTRIES ARIZONA, INC.
and GARY-WILLIAMS ENERGY
CORPORATION
By: /S/ DAVID J. YOUNGGREN By: /S/ FREDRIC L. HOLLIGER
----------------------- ---------------------------
SCHEDULE OF EXHIBITS AND SCHEDULES
EXHIBITS:
A -- Form of COMMON UNDERTAKING LETTER.
B -- Form of GENERAL DEED, ASSIGNMENT, BILL OF SALE AND
ASSUMPTION, covering all of the Assets.
C -- Form of BILL OF SALE, covering the Refinery
Equipment, the Refinery Facilities and the Refinery
Inventory.
D -- Form of ASSIGNMENT AND CONVEYANCE, covering the
Refinery Real Property (other than the Refinery
Site).
E -- Form of GENERAL WARRANTY DEED, covering the Refinery
Site.
F -- Form of BILL OF SALE, covering the Pipeline
Equipment, the Pipeline Facilities and the Pipeline
Inventory.
G -- Form of ASSIGNMENT AND CONVEYANCE, covering the
Pipeline Real Property.
H -- Form of GUARANTEE AND AGREEMENT.
I -- Form of SELLERS' CERTIFICATE.
J -- Form of BUYER'S CERTIFICATE.
K -- Form of NON-FOREIGN STATUS CERTIFICATE.
L -- Form of CRUDE OIL CONTRACT.
SCHEDULES:
1.01.1 -- Earnout
1.01.2 -- Excluded Contracts
1.01.3 -- Processing Units, Shipping Facilities and
Terminals
1.01.4 -- Refinery Site
1.01.5 -- Refinery Site Encumbrances
2.04 -- Allocation of Purchase Price
3.01(e) -- Contested Taxes
3.01(g) -- Litigation
3.01(j) -- Capital Projects
3.01(k) -- Collective Bargaining Agreements
3.01(l) -- Water and Water Rights
3.01(m) -- Financial Statements
3.01(n) -- Summary of Operations
3.02(g) -- Certain Permits, Licenses and Contracts
5.02(a) -- Retained Employees
6.02(i) -- BOR Draft Permit
EXHIBIT A
COMMON UNDERTAKING LETTER
Buyer's Counsel Letterhead
August 8, 1995
Bloomfield Refining Company
Gary-Williams Energy Corporation
370 Seventeenth Street
Suite 5300
Denver, Colorado 80202
Re: Common Undertaking Between Giant Industries Arizona,
Inc., Bloomfield Refining Company and Gary-Williams
Energy Corporation Regarding Due Diligence Assessment
of Bloomfield Refinery
Gentlemen:
On behalf of Giant Industries Arizona, Inc. ("Giant"), Giant's
legal department is in the process of conducting an environmental
due diligence assessment of the Bloomfield, New Mexico refinery
(the "Refinery") of Bloomfield Refining Company and Gary-Williams
Energy Corporation (collectively, "Sellers") in connection with the
sale of the Refinery to Giant. As part of that due diligence,
Giant and its consultants ("Consultants"), have obtained certain
documents from Sellers or their counsel regarding environmental
issues that may be privileged under the attorney-client or
work-product privilege. Consultants are also conducting on-site
inspections of the Refinery and related properties. Certain
information and documents obtained or prepared as a result of the
environmental due diligence assessment will be provided to Sellers
and their counsel in accordance with the Purchase and Sale
Agreement between Giant and Sellers.
Giant, Sellers and their respective counsels have a common
interest in evaluating the environmental status of the Refinery and
related properties to complete the transaction. Therefore, the
transmission of information or documents to Sellers shall not be
deemed as a waiver of any attorney-client or work product privilege
that may otherwise attach to the information or documents. To
maintain the privilege, Sellers and their counsel and any
consultants retained by Sellers for this matter agree not to
divulge or release the documents or information contained in the
documents to any third parties or persons who do not have a need to
know the information for purposes of the due diligence.
Bloomfield Refining Company
August 8, 1995
Page 2
If the foregoing accurately reflects the common understanding
concerning the matters described in this letter, please so indicate
by signing in the space provided below. This common undertaking
may be executed in counterparts which together shall be deemed to
be the same instrument.
Very truly yours,
Giant Industries Arizona, Inc.
Legal Department
By:______________________________
Morgan Gust,
Vice President and General Counsel
AGREED AND ACCEPTED this ____
day of August, 1995:
BLOOMFIELD REFINING COMPANY
and GARY-WILLIAMS ENERGY CORPORATION
By:______________________________
Name:_________________________
Title:__________________________
Holme Roberts & Owen LLC, Counsel for
Bloomfield Refining Company and
Gary-Williams Energy Corporation
By:_______________________________
EXHIBIT B
FORM OF GENERAL DEED, ASSIGNMENT,
BILL OF SALE AND ASSUMPTION AGREEMENT
DO NOT RECORD
GENERAL DEED, ASSIGNMENT, BILL OF SALE AND ASSUMPTION AGREEMENT
This General Deed, Assignment, Bill of Sale and Assumption
Agreement (this "INSTRUMENT"), dated as of ___________, 1995 at
7:00 A.M. local time (the "EFFECTIVE TIME"), is from BLOOMFIELD
REFINING COMPANY, a Delaware corporation ("BRC"), and GARY-WILLIAMS
ENERGY CORPORATION, a Delaware corporation ("GWEC"), both with an
address of 370 Seventeenth Street, Suite 5300, Denver, Colorado
80203, to GIANT INDUSTRIES ARIZONA, INC., an Arizona corporation
("ASSIGNEE"), with an address of 23733 North Scottsdale Road,
Scottsdale, Arizona 85255. BRC and GWEC shall collectively be
referred to as "ASSIGNORS".
Assignors and Assignee are parties to that certain Purchase
and Sale Agreement (the "PURCHASE AGREEMENT"), dated as of August
8, 1995, wherein Assignors agreed to sell and transfer to Assignee
and Assignee agreed to purchase and accept delivery of, certain
property, interests and rights as more specifically described
therein. Capitalized terms used herein without definition shall
have the meaning ascribed thereto in the Purchase Agreement. This
Instrument is being delivered pursuant to the Purchase Agreement
and shall be construed and interpreted consistently therewith.
1. DEED, ASSIGNMENT AND BILL OF SALE. (a) For valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, and in consideration of Assignee accepting delivery
as described below, Assignors hereby grant, assign, transfer,
convey and deliver unto the Assignee, its successors and assigns
forever, the Refinery Assets and the Pipeline Assets, excluding the
Excluding Assets, including all of Assignors' property, assets and
rights, real, personal and mixed, tangible and intangible, choate
and inchoate, of whatever kind and wherever located relating
thereto. The property, assets and rights transferred by this
Agreement include, without limitation, to the extent transferable
(a) the nonexclusive right to enforce and assert the following:
(i) all guaranties, indemnities, warranties and covenants received
by the Assignors' or their predecessors with respect to any of the
Assets transferred hereby and all rights and claims thereunder;
(ii) all of Assignors' rights, claims, defenses and causes of
action against others, known and unknown, including any such
rights, claims, defenses and causes of action to which Assignors
are entitled from the parties from whom Assignors acquired the
Assets or Assignors' predecessors in interest; and (iii) all of
Assignors' rights under warranties of title and indemnities
relating to any matters for which Assignee has assumed any
liability or obligation under the Purchase Agreement; and (b) any
claims against state underground storage tank funds for
Environmental Liabilities relating to underground storage tanks to
the extent Assignor has assumed liability or responsibility for
such underground storage tanks.
(b) There is specifically excepted and reserved from the
terms of this Instrument, the Excluded Assets.
(c) Assignors make in this Instrument no representation,
warranty or covenant, express or implied, with respect to any of
the property, assets or rights transferred hereby; but nothing
herein shall in any way diminish or impair any representation,
warranty or covenant made by or on behalf of the Assignors or
Assignee in the Purchase Agreement or in any assignment,
certificate or other document or instrument executed by the
parties.
2. ACCEPTANCE OF DELIVERY. Assignee hereby accepts delivery
of the property, assets and rights transferred by this Instrument.
3. ASSUMPTION. (a) Except as otherwise provided in the
Purchase Agreement, including without limitation Section 5.01
thereof, Assignors shall remain liable and responsible for all
claims, costs, expenses, liabilities and obligations of any kind or
nature, whether known or unknown, arising from or in any manner
relating to the existence, ownership, operation or maintenance of
the Assets, the conduct of the Businesses, or any activity of
Assignors (including without limitation obligations arising under
the Transferable Permits and Licenses, and the Contracts)
attributable to periods prior to the Effective Time.
(b) Except as otherwise provided in the Purchase
Agreement, including without limitation Section 5.01 thereof,
Assignee shall be liable and responsible for all claims, costs,
expenses, liabilities and obligations of any kind or nature,
whether known or unknown, arising from or in any manner relating to
the ownership or the operation of the Assets, the conduct of
Assignee's business, or any activity of Assignee (including without
limitation obligations arising under the Transferable Permits and
Licenses, and the Contracts) attributable to periods after the
Effective Time.
4. FURTHER ASSURANCES. Assignees and Assignor shall
execute, acknowledge and deliver or cause to be executed,
acknowledged and delivered such instruments and take such other
action as may be reasonably necessary or advisable to carry out
their obligations under this Instrument. The foregoing shall
include the execution, acknowledgment and delivery of (i) separate
transfer instruments for individual assets as may be required given
the nature of an individual asset, and (ii) separate transfer
instruments of the assets on officially approved forms in
sufficient counterparts to satisfy applicable statutory and
regulatory requirements.
Executed as of ___________, 1995, to be effective for all
purposes as of the Effective Time.
ASSIGNORS:
BLOOMFIELD REFINING COMPANY,
a Delaware corporation
By:__________________________
__________________________
________________ President
GARY-WILLIAMS ENERGY CORPORATION,
a Delaware corporation
By:__________________________
__________________________
________________ President
ASSIGNEE:
GIANT INDUSTRIES ARIZONA, INC.,
an Arizona corporation
By:__________________________
__________________________
Executive Vice President
EXHIBIT C
FORM OF BILL OF SALE (REFINERY)
BILL OF SALE
(Refinery)
This Bill of Sale (this "INSTRUMENT"), dated as of
___________, 1995 at 7:00 A.M. local time (the "EFFECTIVE TIME"),
is from BLOOMFIELD REFINING COMPANY, a Delaware corporation
("BRC"), and GARY-WILLIAMS ENERGY CORPORATION, a Delaware
corporation ("GWEC"), both with an address of 370 Seventeenth
Street, Suite 5300, Denver, Colorado 80203, to GIANT INDUSTRIES
ARIZONA, INC., an Arizona corporation ("GRANTEE"), with an address
of 23733 North Scottsdale Road, Scottsdale, Arizona 85255. BRC and
GWEC shall collectively be referred to as ("GRANTORS").
Grantors and Grantee are parties to that certain Purchase and
Sale Agreement (the "PURCHASE AGREEMENT"), dated as of August __,
1995, wherein Grantors agreed to sell and transfer to Grantee, and
Grantee agreed to purchase and accept delivery of, certain
property, interests and rights as more specifically described
therein. Capitalized terms used herein without definition shall
have the meaning ascribed thereto in the Purchase Agreement. This
Instrument is being delivered pursuant to the Purchase Agreement
and shall be construed and interpreted consistently therewith.
For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by Grantors, Grantors
have sold and transferred, and do hereby sell and transfer, to
Grantee all of Grantors' right, title and interest in and to the
following (collectively, the "PROPERTY"):
1. All of Grantors' right, title and interest in and to
all equipment, tools, instruments, machines, parts,
materials, substances, systems, supplies, rolling
stock, furniture, catalysts and chemicals,
communication systems and licenses, vehicles,
electronic systems and computers associated with,
related to or used in connection with the Refinery
or the Refinery Business, including without
limitation, all equipment, tools, instruments,
machines, parts, materials, substances, systems,
supplies, rolling stock, furniture, catalysts and
chemicals, communications systems and licenses,
vehicles, electronic systems and computers located
on the Refinery Site as of the Effective Time.
2. All of Grantors' right, title and interest in and to
all facilities, units, buildings, structures,
fixtures, terminals, pipelines, tanks and other
storage facilities and similar property used in the
refining, processing, treating, transporting or
storage of crude oil and refined products that are
associated with, related to or used in connection
with the Refinery or the Refinery Business,
including without limitation, the processing units,
shipping facilities and terminals described in
Exhibit A attached hereto.
3. All of the following owned by Grantors or any of
Grantors' Affiliates and located at or stored on or
in the Refinery Facilities as of the Effective Time,
including, in each case, linefills, tank bottoms and
work in progress: (a) crude oil, natural gas
liquids and other hydrocarbons processed by the
Refinery; (b) gasoline, diesel fuel, aviation fuel,
fuel oil and other refined products produced by the
Refinery; and (c) products that have been purchased,
partially processed or refined and placed in storage
pending blending or further processing.
4. All crude oil, natural gas liquids and other
hydrocarbons owned by Grantors or any of Grantors'
Affiliates and located at or stored on or in the
Pipeline Facilities as of the Effective Time,
including linefills.
There is specifically excepted and reserved from the terms of this
Instrument, and the term "Property" shall not include (a) the
Accounts Receivable, the Excluded Contracts and all assets of
Grantors or Affiliates of Grantors not associated with, related to
or used in connection with the Businesses, including without
limitation, (i) the Bluebell and Altonah gas plants and related
gathering systems located in Uintah and Duchesne Counties, Utah,
(ii) Grantors' airplane and hangar, and (iii) the stock of
Gary-Williams Acquisition Company, Gary-Williams Retail Company and
Gary-Williams Production Company; and (b) (i) the computers,
software (excluding the Refinery linear program), trademarks,
office equipment and supplies and other fixed assets located in the
ordinary course of business in Grantors' offices in Denver,
Colorado, (ii) all fixed assets located in the ordinary course of
business in Denver or Arapahoe Counties, Colorado, (iii) all
sulphur credits earned prior to the Effective Time, and (iv) the
stock of BRC.
Subject to Permitted Exceptions (as defined in Schedule I
attached hereto), Grantors warrant to Grantee, and to Grantee's
successors and assigns, that Grantors have good title to the
Property free and clear of all liens, claims, liabilities,
encumbrances or rights or interests of any third party whatsoever.
Except as otherwise provided in the Purchase Agreement,
Grantee hereby accepts the transfer set forth in this Instrument
and assumes and agrees to pay, perform and discharge all duties,
liabilities and obligations appurtenant to the Property and arising
after the Effective Time, including the Permitted Exceptions.
Grantors also hereby transfer to Grantee, its successors and
assigns, to the extent so transferable, the benefit of and the
right to enforce the claims, defenses, indemnities, covenants and
warranties, if any, that Grantors are entitled to enforce with
respect to the Property against Grantors' predecessors.
The parties agree that to the extent required to be operative,
the disclaimers of certain warranties contained herein are
"conspicuous" disclaimers for the purposes of any applicable law,
rule or order. The Property is transferred without any implied
warranties or covenants; and fixtures and personal property, if
any, transferred by this Instrument are transferred "AS IS," "WHERE
IS" and "WITH ALL FAULTS." WITHOUT LIMITATION OF THE GENERALITY OF
THE IMMEDIATELY PRECEDING SENTENCE, WITH RESPECT TO ANY FIXTURES OR
PERSONAL PROPERTY TRANSFERRED BY THIS INSTRUMENT GRANTORS EXPRESSLY
DISCLAIM AND NEGATE: (A) ANY IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR
A PARTICULAR PURPOSE, AND (C) ANY IMPLIED OR EXPRESS WARRANTY OF
CONFORMITY TO MODELS OR SAMPLES OF MATERIALS.
The references herein to Permitted Exceptions and to liens,
encumbrances, burdens, defects and other matters are for the
purpose of defining the nature and extent of Grantors' warranty of
title and shall not be deemed to ratify or create any rights in
third parties.
Executed as of ___________, 1995, to be effective for all
purposes as of the Effective Time.
GRANTORS:
BLOOMFIELD REFINING COMPANY,
a Delaware corporation
By:_____________________________
_____________________________
________________ President
GARY-WILLIAMS ENERGY CORPORATION,
a Delaware corporation
By:_____________________________
_____________________________
________________ President
GRANTEE:
GIANT INDUSTRIES ARIZONA, INC.,
an Arizona corporation
By:_____________________________
_____________________________
Executive Vice President
EXHIBIT D
FORM OF ASSIGNMENT AND CONVEYANCE
(REFINERY)
ASSIGNMENT AND CONVEYANCE
(Refinery)
This Assignment and Conveyance (this "INSTRUMENT"), dated as
of ___________, 1995 at 7:00 A.M. local time (the "EFFECTIVE
TIME"), is from BLOOMFIELD REFINING COMPANY, a Delaware corporation
("GRANTOR"), with an address of 370 Seventeenth Street, Suite 5300,
Denver, Colorado 80203, to GIANT INDUSTRIES ARIZONA, INC., an
Arizona corporation ("GRANTEE"), with an address of 23733 North
Scottsdale Road, Scottsdale, Arizona 85255.
For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by Grantor, Grantor
has granted and assigned, and does hereby grant and assign to
Grantee all of Grantor's right, title and interest in and to the
following:
1. The leases, easements, servitudes, rights-of-way,
mineral rights, water rights, appurtenant rights,
permits, licenses, franchises, grants, certificates
and rights to use the surface described on Exhibit A
hereto; together with all other real property,
leases, easements, servitudes, rights-of-way,
mineral rights, water rights, appurtenant rights,
permits, licenses, franchises, grants, certificates
and rights to use the surface associated with,
related to or used in connection with the Bloomfield
Refinery located on the land described on Exhibit A
attached hereto located in San Juan County, New
Mexico or Grantor's business relating to the
purchase, transportation, refinement, processing and
sale of hydrocarbons and hydrocarbon products in
connection with such Bloomfield Refinery; and
2. The water rights described on Exhibit B hereto;
together with all other water rights associated
with, related to or used in connection with such
Bloomfield Refinery or Grantor's business relating
to the purchase, transportation, refinement,
processing and sale of hydrocarbons and hydrocarbon
products in connection with such Bloomfield
Refinery;
together with all of the fixtures located thereon that are real
property under applicable law and all hereditaments and
appurtenances thereunto belonging (collectively, the "Property").
To have and to hold the Property unto Grantee, and its
successors and assigns.
This Instrument is executed without warranty of any kind,
either express or implied, except that, subject to Permitted
Exceptions (as defined in Schedule I attached hereto) and the
Refinery Site Encumbrances (as defined in Schedule II), Grantor
specially warrants and agrees to defend the title of Grantee, and
its successors and assigns, against liens and security interests
created by, through or under Grantor, but not otherwise.
Grantor also hereby transfers to Grantee, and its successors
and assigns, to the extent so transferable, the benefit of and the
right to enforce the claims, defenses, indemnities covenants and
warranties, if any, that Grantor is entitled to enforce with
respect to the Property against Grantor's predecessors.
The parties agree that to the extent required to be operative,
the disclaimers of certain warranties contained herein are
"conspicuous" disclaimers for the purposes of any applicable law,
rule or order. The Property is transferred without any implied
warranties or covenants; and fixtures and personal property, if
any, transferred by this Instrument are transferred "AS IS," "WHERE
IS" and "WITH ALL FAULTS." WITHOUT LIMITATION OF THE GENERALITY OF
THE IMMEDIATELY PRECEDING SENTENCE, WITH RESPECT TO ANY FIXTURES OR
PERSONAL PROPERTY TRANSFERRED BY THIS INSTRUMENT GRANTOR EXPRESSLY
DISCLAIMS AND NEGATES: (A) ANY IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR
A PARTICULAR PURPOSE, AND (C) ANY IMPLIED OR EXPRESS WARRANTY OF
CONFORMITY TO MODELS OR SAMPLES OF MATERIALS.
Separate assignments of the Property may be executed on
officially approved forms by Grantor to Grantee, in sufficient
counterparts to satisfy applicable statutory and regulatory
requirements. Those assignments shall be deemed to contain all of
the exceptions, reservations, limitations, warranties, rights,
titles, powers and privileges set forth herein as fully as though
they were set forth in each such assignment. The interests
conveyed by such separate assignments are the same, and not in
addition to, the Property conveyed herein.
The references herein to Permitted Exceptions, Refinery Site
Encumbrances and to liens and security interests are for the
purpose of defining the nature and extent of Grantor's special
warranty of title and shall not be deemed to ratify or create any
rights in third parties.
Executed as of ___________, 1995, to be effective for all
purposes as of the Effective Time.
GRANTOR:
BLOOMFIELD REFINING COMPANY,
a Delaware corporation
By:_______________________________
_______________________________
____________President
GRANTEE:
GIANT INDUSTRIES ARIZONA, INC.,
an Arizona corporation
By:_______________________________
_______________________________
Executive Vice President
ACKNOWLEDGMENT CERTIFICATES
GRANTOR
STATE OF _____________ )
) ss.
_______ COUNTY OF ____________)
This instrument was acknowledged before me on _____________,
1995, by __________________ as ____ President of BLOOMFIELD
REFINING COMPANY, a Delaware corporation.
_______________________________
[NOTARIAL SEAL] Notary Public
My commission expires: _______________________
GRANTEE
STATE OF _____________ )
) ss.
_______ COUNTY OF ____________)
This instrument was acknowledged before me on _____________,
1995, by __________________ as Executive Vice President of GIANT
INDUSTRIES ARIZONA, INC., an Arizona corporation.
_______________________________
[NOTARIAL SEAL] Notary Public
My commission expires: _______________________
EXHIBIT E
FORM OF GENERAL WARRANTY DEED (REFINERY SITE)
GENERAL WARRANTY DEED
(Refinery Site)
This General Warranty Deed (this "INSTRUMENT"), dated as of
_____________, 1995 at 7:00 A.M. local time (the "EFFECTIVE TIME"),
is from BLOOMFIELD REFINING COMPANY, a Delaware corporation
("GRANTOR"), with an address of 370 Seventeenth Street, Suite 5300,
Denver, Colorado 80203, to GIANT INDUSTRIES ARIZONA, INC., an
Arizona corporation ("GRANTEE"), with an address of 23733 North
Scottsdale Road, Scottsdale, Arizona 85255.
For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by Grantor, Grantor
has granted and does hereby grant to Grantee the following
described land:
The South One-Half of the Northwest Quarter (S1/2 NW1/4); The
Northeast Quarter of the Southwest Quarter (NE1/4SW1/4); The
North One-Half of the Northwest Quarter of the Southwest
Quarter (N1/2NW1/4SW1/4) and the Southeast Quarter of the
Northwest Quarter of the Southwest Quarter (SE1/4NW1/4SW1/4)
of Section 26; AND
The Southeast Quarter of the Northeast Quarter
(SE1/4NE1/4) and the North One-Half of the Northeast Quarter
of the Southeast Quarter (N1/2NE1/4SE1/4) of Section 27;
AND
The West One-Half of the Northeast Quarter (W1/2NE1/4) of
Section 27;
EXCEPT the following part of said tract, to wit:
BEGINNING at the Northwest corner of said tract;
THENCE South 30 feet;
THENCE east parallel to the north line of said tract, 676.6
feet;
THENCE North 30 feet;
THENCE West along the North line of said tract 676.6 feet to
the place of beginning.
AND;
BEGINNING at a point which is 826.08 feet North 31
degrees 16' East from the West Quarter Corner of said Section
27;
THENCE North 7 degrees 55' East 135.0 feet along the East
Right of Way of State Highway #44;
THENCE South 82 degrees 05' East 161.3 feet;
THENCE South 7 degrees 55' West 135.0 feet;
THENCE North 82 degrees 05' West 161.3 feet to the point of
beginning.
AND;
A tract of land situated in the Southeast Quarter of the
Northwest Quarter (SE1/4NW1/4) of said Section 27, more
particularly described as follow:
BEGINNING at a point which is the center of said SECTION 27;
THENCE N 00 degrees 23' 49" E along the North-South Centerline
of Section 27, a Distance of 554.30 feet, more or less, to a
point on the Easterly Right of Way of the Hammond Canal as
described in the San Juan County records in Book 633,
Page 243B (Parcel No. HMC);
THENCE Southwesterly along a non-tangent curve to the left as
described in said description 90 feet, more or less;
THENCE South 04 degrees 21' 30" West along a line tangent to
said curve 487.17 feet, more or less, along the Easterly Right
of Way line of the Hammond Canal to a point on the East-West
Centerline of Section 27;
THENCE North 89 degrees 24' 29" East 79.81 feet along said
East-West Centerline to the point of beginning.
All in Township 29 North of Range 11 West, N.M.P.M., San Juan
County, New Mexico;
together with all of the fixtures that are real property under
applicable law located thereon and all hereditaments and
appurtenances thereunto belonging. Said land, fixtures,
hereditaments and appurtenances are collectively referred to as the
"PROPERTY."
To have and to hold the Property unto Grantee, and its
successors and assigns.
Subject to Permitted Exceptions (as described in Schedule I
attached hereto), and the Refinery Site Encumbrances (as described
in Schedule II attached hereto), the Property has been granted, and
is granted by Grantor to Grantee with warranty covenants.
Grantor also hereby transfers to Grantee, and its successors
and assigns, to the extent so transferable, the benefit of and the
right to enforce the claims, defenses, indemnities, covenants and
warranties, if any, that Grantor is entitled to enforce with
respect to the Property against Grantor's predecessors in title to
the Property.
The parties agree that to the extent required to be operative,
the disclaimers of certain warranties contained herein are
"conspicuous" disclaimers for the purposes of any applicable law,
rule or order. The Property is transferred without any implied
warranties or covenants; and fixtures and personal property, if
any, transferred by this Instrument are transferred "AS IS," "WHERE
IS" and "WITH ALL FAULTS." WITHOUT LIMITATION OF THE GENERALITY OF
THE IMMEDIATELY PRECEDING SENTENCE, WITH RESPECT TO ANY FIXTURES OR
PERSONAL PROPERTY TRANSFERRED BY THIS INSTRUMENT GRANTOR EXPRESSLY
DISCLAIMS AND NEGATES: (A) ANY IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR
A PARTICULAR PURPOSE, AND (C) ANY IMPLIED OR EXPRESS WARRANTY OF
CONFORMITY TO MODELS OR SAMPLES OF MATERIALS.
The references herein to Permitted Exceptions and to Refinery
Site Encumbrances and other matters are for the purpose of defining
the nature and extent of Grantor's warranty and shall not be deemed
to ratify or create any right in third parties.
This Instrument shall bind and inure to the benefit of Grantor
and Grantee, and their respective successors and assigns.
Executed as of ___________, 1995, to be effective for all
purposes as of the Effective Time.
GRANTOR:
BLOOMFIELD REFINING COMPANY,
a Delaware corporation
By:________________________________
________________________________
_____ President
GRANTEE:
GIANT INDUSTRIES ARIZONA, INC.,
an Arizona corporation
By:_________________________________
_________________________________
Executive Vice President
ACKNOWLEDGMENT CERTIFICATES
GRANTOR
STATE OF _____________ )
) ss.
_______ COUNTY OF ____________)
This instrument was acknowledged before me on _____________,
1995, by __________________ as ____ President of BLOOMFIELD
REFINING COMPANY, a Delaware corporation.
_______________________________
[NOTARIAL SEAL] Notary Public
My commission expires: _______________________
GRANTEE
STATE OF _____________ )
) ss.
_______ COUNTY OF ____________)
This instrument was acknowledged before me on _____________,
1995, by __________________ as Executive Vice President of GIANT
INDUSTRIES ARIZONA, INC., an Arizona corporation.
_______________________________
[NOTARIAL SEAL] Notary Public
My commission expires: _______________________
EXHIBIT F
FORM OF BILL OF SALE (PIPELINE)
BILL OF SALE
(Pipeline)
This Bill of Sale (this "INSTRUMENT"), dated as of
___________, 1995 at 7:00 A.M. local time (the "EFFECTIVE TIME"),
is from BLOOMFIELD REFINING COMPANY, a Delaware corporation
("BRC"), and GARY-WILLIAMS ENERGY CORPORATION, a Delaware
corporation ("GWEC"), both with an address of 370 Seventeenth
Street, Suite 5300, Denver, Colorado 80203, to GIANT INDUSTRIES
ARIZONA, INC., an Arizona corporation ("GRANTEE"), with an address
of 23733 North Scottsdale Road, Scottsdale, Arizona 85255. BRC and
GWEC shall collectively be referred to as ("GRANTORS").
Grantors and Grantee are parties to that certain Purchase and
Sale Agreement (the "PURCHASE AGREEMENT"), dated as of August 8,
1995, wherein Grantors agreed to sell and transfer to Grantee and
Grantee agreed to purchase and accept delivery of, certain
property, interests and rights as more specifically described
therein. Capitalized terms used herein without definition shall
have the meaning ascribed thereto in the Purchase Agreement. This
Instrument is being delivered pursuant to the Purchase Agreement
and shall be construed and interpreted consistently therewith.
For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by Grantors, Grantors
have sold and transferred, and do hereby sell and transfer, to
Grantee all of Grantors' right, title and interest in and to the
following (collectively, the "Property"):
1. All equipment, tools, instruments, machines, parts,
materials, substances, systems, supplies, rolling
stock, furniture, catalysts and chemicals,
communications systems and licenses, vehicles,
electronic systems and computers associated with,
related to or used in connection with the Pipeline
and the Pipeline Business; and
2. All facilities, units, buildings, structures,
fixtures, terminals, pipelines, tanks and other
storage facilities and similar property used in the
refining, processing, treating, transporting or
storage of crude oil and refined products associated
with, related to or used in connection with the
Pipeline or the Pipeline Business, including,
without limitation, all pipes, pumps and pumping
stations.
There is specifically excepted and reserved from the terms of this
Instrument, and the term "Property" shall not include (a) the
Accounts Receivable, the Excluded Contracts and all assets of
Grantors and their Affiliates not associated with, related to or
used in connection with the Businesses, including without
limitation (i) the Bluebell and Altonah gas plants and related
gathering systems located in Uintah and Duchesne Counties, Utah,
(ii) Grantors' airplane and hangar, and (iii) the stock of
Gary-Williams Acquisition Company, Gary-Williams Retail Company and
Gary-Williams Production Company; and (b) (i) the computers,
software (excluding the Refinery linear program), trademarks,
office equipment and supplies and other fixed assets located in the
ordinary course of business in Grantors' offices in Denver,
Colorado, (ii) all fixed assets located in the ordinary course of
business in Denver or Arapahoe Counties, Colorado, (iii) all
sulphur credits earned prior to the Effective Time, and (iv) the
stock of BRC.
This Instrument is executed without warranty of any kind,
either express or implied, except that, subject to Permitted
Exceptions (as defined in Schedule I attached hereto), Grantors
specially warrant and agree to defend the title of Grantee, and its
successors or assigns, against liens and security interests created
by, through or under Grantors, but not otherwise.
Except as otherwise provided in the Purchase Agreement,
Grantee hereby accepts the transfer set forth in this Instrument
and assumes and agrees to pay, perform and discharge all duties,
liabilities and obligations appurtenant to the Property arising
after the Effective Time, including the Permitted Exceptions.
Grantors also hereby transfer to Grantee, and its successors
and assigns, to the extent so transferable, the benefit of and the
right to enforce the claims, defenses, indemnities covenants and
warranties, if any, that Grantors are entitled to enforce with
respect to the Property against Grantors' predecessors.
The parties agree that to the extent required to be operative,
the disclaimers of certain warranties contained herein are
"conspicuous" disclaimers for the purposes of any applicable law,
rule or order. The Property is transferred without any implied
warranties or covenants; and fixtures and personal property, if
any, transferred by this Instrument are transferred "AS IS," "WHERE
IS" and "WITH ALL FAULTS." WITHOUT LIMITATION OF THE GENERALITY OF
THE IMMEDIATELY PRECEDING SENTENCE, WITH RESPECT TO ANY FIXTURES OR
PERSONAL PROPERTY TRANSFERRED BY THIS INSTRUMENT GRANTORS EXPRESSLY
DISCLAIM AND NEGATE: (A) ANY IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR
A PARTICULAR PURPOSE, AND (C) ANY IMPLIED OR EXPRESS WARRANTY OF
CONFORMITY TO MODELS OR SAMPLES OF MATERIALS.
The references herein to Permitted Exceptions and liens and
security interest are for the purpose of defining the nature and
extent of Grantors' special warranty of title and shall not be
deemed to ratify or create any rights in third parties.
Executed as of ___________, 1995, to be effective for all
purposes as of the Effective Time.
GRANTORS:
BLOOMFIELD REFINING COMPANY,
a Delaware corporation
By:_____________________________
_____________________________
________________ President
GARY-WILLIAMS ENERGY CORPORATION,
a Delaware corporation
By:_____________________________
_____________________________
________________ President
GRANTEE:
GIANT INDUSTRIES ARIZONA, INC.,
an Arizona corporation
By:_____________________________
_____________________________
Executive Vice President
EXHIBIT G
FORM OF ASSIGNMENT AND CONVEYANCE (PIPELINE)
ASSIGNMENT AND CONVEYANCE
(Pipeline)
This Assignment and Conveyance (this "INSTRUMENT"), dated as
of ___________, 1995 at 7:00 A.M. local time (the "EFFECTIVE
TIME"), is from BLOOMFIELD REFINING COMPANY, a Delaware corporation
("BRC"), and GARY-WILLIAMS ENERGY CORPORATION, a Delaware
corporation ("GWEC"), both with an address of 370 Seventeenth
Street, Suite 5300, Denver, Colorado 80203, to GIANT INDUSTRIES
ARIZONA, INC., an Arizona corporation ("GRANTEE"), with an address
of 23733 North Scottsdale Road, Scottsdale, Arizona 85255. BRC and
GWEC shall collectively be referred to as ("Grantors").
For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by Grantors, Grantors
have granted and assigned, and do hereby grant and assign, to
Grantee all of Grantors' right, title and interest in and to the
leases, easements, servitudes, rights-of-way, mineral rights, water
rights, appurtenant rights, permits, licenses, franchises, grants,
certificates and rights to use the surface described on Exhibit A
hereto; together with all other real property, leases, easements,
servitudes, rights-of-way, mineral rights, water rights,
appurtenant rights, permits, licenses, franchises, grants,
certificates and rights to use the surface associated with, related
to or used in connection with the Pipeline as described on Exhibit
A attached hereto or Grantors' business relating to the
transportation of hydrocarbons and hydrocarbon products through the
Pipeline; together with all of the fixtures that are real property
under applicable law located thereon and all hereditaments and
appurtenances thereunto belonging (collectively, the "PROPERTY").
To have and to hold the Property unto Grantee, and its
successors and assigns.
This Instrument is executed without warranty of any kind,
either express or implied, except that, subject to Permitted
Exceptions (as defined in Schedule I attached hereto), Grantors
specially warrant and agree to defend the title of Grantee, and its
successors and assigns, against liens and security interests
created by, through or under Grantors, but not otherwise.
Grantors also hereby assign and convey to Grantee, and its
successors and assigns, to the extent so transferable, the benefit
of and the right to enforce the claims, defenses, indemnities
covenants and warranties, if any, that Grantors are entitled to
enforce with respect to the Property against Grantors'
predecessors.
The parties agree that to the extent required to be operative,
the disclaimers of certain warranties contained herein are
"conspicuous" disclaimers for the purposes of any applicable law,
rule or order. The Property is transferred without any implied
warranties or covenants; and fixtures and personal property, if
any, transferred by this Instrument are transferred "AS IS," "WHERE
IS" and "WITH ALL FAULTS." WITHOUT LIMITATION OF THE GENERALITY OF
THE IMMEDIATELY PRECEDING SENTENCE, WITH RESPECT TO ANY FIXTURES OR
PERSONAL PROPERTY TRANSFERRED BY THIS INSTRUMENT GRANTORS EXPRESSLY
DISCLAIM AND NEGATE: (A) ANY IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR
A PARTICULAR PURPOSE, AND (C) ANY IMPLIED OR EXPRESS WARRANTY OF
CONFORMITY TO MODELS OR SAMPLES OF MATERIALS.
Separate assignments of the Property may be executed on
officially approved forms by Grantors to Grantee, in sufficient
counterparts to satisfy applicable statutory and regulatory
requirements. Those assignments shall be deemed to contain all of
the exceptions, reservations, limitations, warranties, rights,
titles, powers and privileges set forth herein as fully as though
they were set forth in each such assignment. The interests
conveyed by such separate assignments are the same, and not in
addition to, the Property conveyed herein.
The references herein to Permitted Exceptions and to liens and
security interests are for the purpose of defining the nature and
extent of Grantors' special warranty of title and shall not be
deemed to ratify or create any rights in third parties.
Executed as of ___________, 1995, to be effective for all
purposes as of the Effective Time.
GRANTORS:
BLOOMFIELD REFINING COMPANY,
a Delaware corporation
By:_____________________________
_____________________________
________________ President
GARY-WILLIAMS ENERGY CORPORATION,
a Delaware corporation
By:_____________________________
_____________________________
________________ President
GRANTEE:
GIANT INDUSTRIES ARIZONA, INC.,
an Arizona corporation
By:_____________________________
_____________________________
Executive Vice President
ACKNOWLEDGMENT CERTIFICATES
GRANTORS
STATE OF _____________ )
) ss.
_______ COUNTY OF ____________)
This instrument was acknowledged before me on _____________,
1995, by __________________ as ____ President of BLOOMFIELD
REFINING COMPANY, a Delaware corporation.
___________________________
[NOTARIAL SEAL] Notary Public
My commission expires: _______________________
STATE OF _____________ )
) ss.
_______ COUNTY OF ____________)
This instrument was acknowledged before me on _____________,
1995, by __________________ as ____ President of GARY-WILLIAMS
ENERGY CORPORATION, a Delaware corporation.
___________________________
[NOTARIAL SEAL] Notary Public
My commission expires: _______________________
GRANTEE
STATE OF _____________ )
) ss.
_______ COUNTY OF ____________)
This instrument was acknowledged before me on _____________,
1995, by __________________ as Executive Vice President of GIANT
INDUSTRIES ARIZONA, INC., an Arizona corporation.
___________________________
[NOTARIAL SEAL] Notary Public
My commission expires: _______________________
EXHIBIT H
FORM OF GUARANTEE AND AGREEMENT
GUARANTEE AND AGREEMENT
This Guarantee and Agreement (this "AGREEMENT"), dated as of
___________, 1995, is from GIANT INDUSTRIES, INC., a Delaware
corporation, with an address of 23733 North Scottsdale Road,
Scottsdale, Arizona 85255 ("GUARANTOR"), and to and for the benefit
of BLOOMFIELD REFINING COMPANY, a Delaware corporation ("BRC"),
with an address of 370 Seventeenth Street, Suite 5300, Denver,
Colorado 80203, and its successors and assigns.
RECITALS
Gary-Williams Energy Corporation, a Delaware corporation
("GWEC"), BRC and Giant Industries Arizona, Inc., an Arizona
corporation ("GIANT ARIZONA") entered into that certain Purchase
and Sale Agreement (the "PURCHASE AGREEMENT"), dated as of August
8, 1995, wherein Sellers agreed to sell and transfer to Giant
Arizona, and Giant Arizona agreed to purchase and accept delivery
of, certain property, interests and rights as more specifically
described in the Purchase Agreement. As set forth in Section 2.02
of the Purchase Agreement the consideration to be paid by Giant
Arizona under the Purchase Agreement, included an "Earnout," if and
when earned, as more specifically described in Schedule 1.01.1 to
the Purchase Agreement (the "EARNOUT"). Capitalized terms used
herein without definition shall have the meaning ascribed thereto
in the Earnout.
Guarantor owns all of the outstanding shares of stock of Giant
Arizona, and Guarantor, and the other direct and indirect
subsidiaries of Guarantor are mutually dependent on each other in
the conduct of their respective businesses as an integrated
operation. It is a condition to the consummation of the
transactions provided for in the Purchase Agreement that Guarantor
shall have executed and delivered this Agreement.
AGREEMENT
In consideration of the foregoing, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged by Guarantor, and in order to induce Sellers to
proceed with the consummation of the transactions provided for in
the Purchase Agreement, Guarantor hereby agrees as follows:
1. RATIFICATION. Guarantor hereby ratifies and agrees to be
bound by the provisions contained in Subsection 3.01(c) and Section
3.02 of the Earnout.
2. GUARANTEE. Guarantor hereby guarantees the duties and
obligations of Giant Arizona under the Earnout (the "Obligations")
as follows:
(a) If and whenever Giant Arizona fails for any reason
whatsoever punctually to pay or perform any of the Obligations,
Guarantor shall cause each and every such Obligation to be paid or
performed on demand as if Guarantor instead of Giant Arizona were
expressed to be the primary obligor of such Obligations to the
intent that BRC shall receive the same amounts and benefits as
would have been receivable had such payments or performances had
been made by Giant Arizona.
(b) If any payment received by BRC shall, on the
subsequent bankruptcy, insolvency, corporate reorganization or
other similar event applying to Giant Arizona, be avoided or set
aside under any laws relating to bankruptcy, insolvency, corporate
reorganization or other such similar event, such payments shall not
be considered as discharging or diminishing the liability of
Guarantor, and the guarantee contained herein shall continue to
apply as if such payment had at all times remained owing by Giant
Arizona and Guarantor shall indemnify BRC with respect thereto.
(c) Guarantor hereby agrees that its obligations under
the guarantee contained herein shall be unconditional and
irrevocable and that Guarantor shall be fully liable irrespective
of the validity, regularity, legality or enforceability against
Giant Arizona of, or of any defense or counterclaim whatsoever
available to Giant Arizona in relation to, the Obligations, whether
or not any action has been taken to enforce the same or any
judgment obtained against Giant Arizona, whether or not any time or
indulgence has been granted to Giant Arizona by or on behalf of
BRC, whether or not there have been any dealings or transactions
between Giant Arizona and BRC, whether or not BRC has changed its
status, functions, control or ownership, whether or not the Earnout
has been amended, changed or otherwise modified, and whether or not
any other circumstances have occurred which might otherwise
constitute a legal or equitable discharge of or defense of a
guarantor. Accordingly, the validity of the guarantee contained
herein shall not be affected by reason of any invalidity,
irregularity, illegality or unenforceability of all or any of the
Obligations and this guarantee shall not be discharged nor shall
the liability of Guarantor under the guarantee contained herein be
affected by any act, thing or omission or means whatever whereby
its liability would not have been discharged if it had been the
principal obligor.
(d) In furtherance of the foregoing and not in
limitation thereof, no action or inaction by or on behalf of Giant
Arizona, Guarantor or BRC or any other person and no change of law
or circumstances shall affect, release or diminish Guarantor's
obligations, liabilities, agreements or duties hereunder.
Guarantor hereby expressly agrees that BRC may, from time to time,
without notice to or the consent of Guarantor (i) amend, change or
modify, in whole or in part, the Earnout, (ii) give or refuse to
give any waivers or other indulgences, or neglect, delay, fail or
refuse to take or prosecute any action in connection with the
Earnout, (iii) change, rearrange, extend or renew the time, terms,
or manner for payment or performance of any of Giant Arizona's
obligations or duties, and (iv) compromise or settle any duties or
obligations under the Earnout. Furthermore, the guarantee
contained herein is a continuing guarantee and shall apply to and
cover the Earnout and all renewals, extensions, amendments,
modifications, supplements or restatements thereof.
(e) BRC may invoke the benefits of the guarantee
contained herein before pursuing any remedies against Giant Arizona
or any other person. BRC may maintain an action against Guarantor
on the guarantee contained herein without joining Giant Arizona
therein and without bringing a separate action against Giant
Arizona.
(f) Guarantor hereby waives diligence, presentment,
demand of payment, filing or claims with a court in the event of
dissolution, liquidation, merger or bankruptcy of Giant Arizona,
any right to require a proceeding first against Giant Arizona,
protest or notice with respect to the Obligations and all demands
whatsoever and hereby covenants that the guarantee contained herein
shall be a continuing guarantee which will not be discharged except
by complete payment and performance of the Obligations.
(g) Notwithstanding anything contained in this Agreement
to the contrary, Guarantor shall have the same rights as Giant
Arizona has to assert any defense or claim under the Purchase
Agreement as a defense to this guarantee.
3. REPRESENTATIONS AND WARRANTIES. Guarantor hereby
represents and warrants to BRC as follows:
(a) ORGANIZATION. Guarantor is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Delaware, and Guarantor is duly qualified to carry on
its business in the State of New Mexico.
(b) POWER AND AUTHORITY. Guarantor has all requisite
power and authority to carry on its business as presently
conducted, to enter into this Agreement, and to perform its other
obligations under this Agreement. This Agreement does not violate,
and is not in conflict with, any provision of Guarantor's charter,
bylaws or governing documents, or any agreement or instrument to
which Guarantor is a party or is bound, or any judgment, decree,
order, statute, rule or regulation applicable to Guarantor.
(c) DUE AUTHORIZATION. The execution, delivery and
performance of this Agreement have been duly and validly authorized
by all requisite action on the part of Guarantor.
(d) BINDING OBLIGATIONS. This Agreement has been duly
executed and delivered on behalf of Guarantor, and constitutes the
legal, valid and binding obligations of Guarantor, enforceable
against Guarantor in accordance with its terms, subject to
applicable bankruptcy, insolvency and similar laws relating to or
affecting the enforcement of creditors' rights generally and to
general principles of equity.
4. MISCELLANEOUS. This Agreement shall bind Guarantor and
inure to the benefit of BRC and its permitted successors and
assigns under the Earnout. This Agreement may not be altered or
amended, nor any rights hereunder be waived, except by an
instrument in writing executed by the party or parties to be
charged with such amendment or waiver. A waiver of any term,
provision or condition of this Agreement in any one or more
instances, shall not be deemed to be, or construed as, a further or
continuing waiver of any such term, provision or condition or as a
waiver of any other term, provision or condition of this Agreement.
Executed as of the date first set forth above.
GIANT INDUSTRIES, INC., a Delaware
corporation
By:_______________________________
Fredric L. Holliger, Executive
Vice President
ACKNOWLEDGMENT CERTIFICATE
STATE OF __________________ )
) ss.
_______ COUNTY OF _________ )
This instrument was acknowledged before me on
______________, 1995, by FREDRIC L. HOLLIGER as Executive Vice
President of GIANT INDUSTRIES, INC., a Delaware corporation.
Witness my hand and official seal.
________________________________
[NOTARIAL SEAL] Notary Public
My commission expires:
EXHIBIT I
FORM OF SELLERS' CERTIFICATE
Bloomfield Refinery Company, a Delaware corporation, and
Gary-Williams Energy Corporation, a Delaware corporation
(collectively, "SELLERS"), hereby certify as follows with respect
to that certain Purchase and Sale Agreement, dated as of August 8,
1995 (the "AGREEMENT"), among Sellers and Giant Industries Arizona,
Inc., an Arizona corporation ("Buyer").
1. Those representations and warranties of Sellers contained
in Section 3.01 of the Agreement are true at and as of the date
hereof in all material respects.
2. Those covenants and agreements of Sellers contained in
Section 4.01 of the Agreement have been performed in all material
respects.
3. Those conditions to Sellers' obligations contained in
Sections 6.01 and 6.03 of the Agreement have been satisfied to the
satisfaction of Sellers or waived by Sellers.
Executed as of the _____ day of _______________, 1995.
BLOOMFIELD REFINING COMPANY
By:_____________________________
__________President
GARY-WILLIAMS ENERGY CORPORATION
By:_____________________________
__________President
EXHIBIT J
FORM OF BUYER'S CERTIFICATE
Giant Industries Arizona, Inc., an Arizona corporation
("BUYER"), hereby certifies as follows with respect to that certain
Purchase and Sale Agreement, dated as of August 8, 1995 (the
"AGREEMENT"), among the Buyer and Bloomfield Refining Company, a
Delaware corporation, and Gary-Williams Energy Corporation, a
Delaware corporation (collectively, "Sellers").
1. Those representations and warranties of Buyer contained
in Section 3.02 of the Agreement are true at and as of the date
hereof in all material respects.
2. Those covenants and agreements of Buyer contained in
Section 4.02 of the Agreement have been performed in all material
respects.
3. Those conditions to Buyer's obligation contained in
Sections 6.02 and 6.03 of the Agreement have been satisfied to the
satisfaction of Buyer or waived by Buyer.
Executed as of the _____ day of _____________________, 1995.
GIANT INDUSTRIES ARIZONA, INC.
By:________________________________
_________ President
EXHIBIT K
FORM OF NON-FOREIGN STATUS CERTIFICATE
___________________________, a _____________ corporation
("SELLER"), hereby certifies as follows with respect to that
certain Purchase and Sale Agreement, dated as of August 8, 1995
(the "AGREEMENT"), among Seller, _________________ a corporation,
as Sellers, and _____________________________________, a
_______________ corporation ("Buyer"), as Buyer, and pursuant the
Foreign Investment and Real Property Tax Act of 1980, as amended.
1. Seller is not a non-resident alien, foreign corporation,
foreign partnership, foreign trust, or foreign estate alien (as
those terms are defined in the Internal Revenue Code of 1986 as
amended (the "Code")) and the Treasury Regulations thereunder.
2. Seller's United States of America employer identification
number is ________________.
3. Seller's office address is ______________________________
__________________________________________________________.
Attest: ______________________________
By:___________________________
___________________________
___________________________ _______________ President
By:________________________
Secretary
(Seal)
ACKNOWLEDGMENT
State of __________________)
) ss.
_______ County of _________)
The foregoing instrument was acknowledged before me this _____
day of ____________, 19___, by ______________ as __________________
of the _____________________________.
Witness my hand and official seal.
My commission expires:
_______________________________
CONFIDENTIAL TREATMENT REQUESTED AND EXHIBIT FILED WITH THE SEC
UNDER SEPARATE COVER
EXHIBIT L
GIANT INDUSTRIES, INC.
23733 NORTH SCOTTSDALE ROAD
SCOTTSDALE, AZ 85255
P.O. BOX 12999, SCOTTSDALE, AZ 85255
(602) 585-8888
CRUDE OIL CONTRACT
TO: GARY-WILLIAMS ENERGY CORPORATION (GWEC) DATE:
370 17th Street, Suite 5300
Denver CO 80202
GIANT CONTRACT #:7765-MKG-S
- -----------------------------------------------------------------
This is to confirm conversations in which the following
transaction was agreed upon:
INTENT: It is the intent herein, of both Parties,
to share the financial savings of GWEC's
XXXXXXXXXXXXXXXXXXX Contracts (the
"Contracts"), listed herein, as now or
hereafter amended or extended or replaced.
Contracts are deemed to have been replaced
in a situation where GWEC sought a
cancellation of contracts shown, and
entered into a new contract with the
supplier including essentially the same
production under similar terms and
conditions. In such a replacement
contract, the shared financial savings
shall only apply to volumes, which were a
part of the original contract.
Parties Date Type
------- ---- ----
GWEC and XXXXXXXXXX 10/14/94 XXXXXXXXXX
GWEC and XXXXXXXXXX 03/02/95 XXXXXXXXXX
GWEC and XXXXXXXXXX 06/20/91 XXXXXXXXXX
GWEC and XXXXXXXXXX 06/29/90 XXXXXXXXXX
GWEC and XXXXXXXXXX 09/06/90 XXXXXXXXXX
GWEC and XXXXXXXXXX 12/09/94 XXXXXXXXXX
GWEC and XXXXXXXXXX 08/16/94 XXXXXXXXXX
MONTHLY PAYMENT TO
GIANT FROM GWEC:
Payment shall be made by GWEC on or before
the 25th day of the month following the
month of delivery as it relates to all
XXXXXXXXXX Contracts. A good faith
estimate payment shall be made by GWEC on
or before the last day of the month
following the month of delivery as it
relates to the XXXXXXXXXX Contract. The
good faith estimate payment shall be
adjusted to the then current actual volumes
and values on or before the 10th day of the
fourth month following the month of
delivery. Further payment adjustments
shall be made monthly as they occur. All
payments shall be made by bank wire
transfer in immediately available funds to
a bank into an account as designated by the
recipient of the payment. Each month GWEC
shall issue to Giant a complete statement
supporting all payments and adjustments.
GWEC's payment each month to Giant shall
equal a percent, as shown below, of the
difference between XXXXXXXXXXXXXXXXXX
figure as published by Platt's Oilgram
Price Report ("Platts"), for the month of
delivery, and GWEC's Purchase Price of
crude oil under the Contracts for the same
month, multiplied by GWEC's monthly
receipts from Contracts shown above.
Percentage
----------
Retained by Paid to
GWEC Giant
----------- -------
From (Date of Closing) to
Six Months After Closing XXX XXX
(Next Six Months) XXX XXX
(Thereafter to Termination) XXX XXX
TERM: A period of time equal in length to the
earlier of (i) the expiration or
cancellation of the Contracts, as now or
hereafter amended or extended or replaced;
or (ii) December 31, 2001; or, (iii)
termination of Giant's obligation to make
Earnout Payments pursuant to Schedule
1.01.1 of the Purchase and Sale Agreement
among Bloomfield Refining Company, GWEC,
and Giant Industries Arizona, Inc., dated
August 8, 1995 (the "Purchase and Sale
Agreement"). The XXXXXXXXX Company/GWEC
Contract dated March 2, 1995 shall cease
being a part of this Agreement on June 30,
1996.
COVENANTS: GWEC agrees to at all times conduct their
operations in good faith so as not to
subvert the intent of the parties herein.
AUDITS: (a) Giant, or its designated independent
auditing firm, shall have the right to
review and audit the books and records of
GWEC respecting the payments required
herein. GWEC shall provide Giant with any
information required to determine such
payments. Except as provided below, Giant
shall bear the costs of any audit conducted
by it. Giant shall maintain the
confidentiality of all nonpublic
information relating to GWEC.
(b) Each payment shall be final unless
Giant gives written objection within one
year after the payment.
(c) All late payments and all amounts found
to be due to Giant shall bear interest at
the lesser of 10 percent per annum and the
maximum legal rate. If Giant objects to a
payment, the payment shall not be final
until it is resolved by agreement of the
parties or by arbitration pursuant to this
Agreement. Payments due to reasonable and
customary accounting adjustments are not
subject to the interest penalty described
herein.
ARBITRATION: (a) The parties agree to submit all
controversies, claims and matters of
difference relating to the determination of
payments to arbitration.
(b) The party desiring arbitration shall so
notify the other party, identifying in
reasonable detail the matters to be
arbitrated and the relief sought.
Arbitration hereunder shall be by a partner
or member in a neutral national certified
public accounting firm not affiliated with
either party. The American Arbitration
Association ("AAA") shall submit a list of
persons meeting the criteria outlined above
and the parties shall mutually agree upon
the arbitrator. In the event that the
parties fail to select an arbitrator as
required above, the AAA shall select the
arbitrator.
(c) All matters arbitrated hereunder shall
be arbitrated in Albuquerque, New Mexico
and shall be governed by New Mexico law.
Arbitration shall be conducted in
accordance with the Commercial Arbitration
rules of the AAA, except to the extent such
Rules conflict with the express provisions
of this Agreement (which shall prevail in
the event of such conflict). The
arbitrator shall conduct a hearing no later
than 60 days after submission of the matter
to arbitration, and a decision shall be
rendered by the arbitrator within 30 days
of the hearing. Any award entered shall be
made by a written opinion stating the
reasons for the award made.
(d) This submission and agreement to
arbitrate shall be specifically
enforceable.
(e) If the arbitration award reflects an
underpayment of the disputed payment by an
amount greater than five percent of the
correct amount, GWEC shall pay the AAA's
fees, the arbitrator's fee, and Giant's
audit costs and attorneys' and experts'
fees, provided these fees are reasonable.
Giant shall pay the AAA's fees, the
arbitrator's fees, and GWEC attorneys' and
experts' fees, if the arbitration award
reflects that the disputed payment was
equal to or greater than the correct
amount. Giant shall pay the AAA's fees and
the arbitrator's fees, and each Party shall
pay its own attorneys' and experts' fees,
if the arbitration award reflects an
underpayment of the disputed payment by an
amount up to five percent of the correct
amount.
ADDITIONAL
PROVISIONS: GWEC'S "Purchase Price" of the barrels
shall be defined as the per barrel monthly
weighted average price (i) paid to the
supplier; plus or minus as applicable (ii)
all reasonable pipeline charges, or
credits, paid to or received from any other
entity that are directly related to the
transportation or exchange of the barrels
that are the subject of the Contracts to a
Platt's trading location, including, but
not limited to, tariffs, line loss and
gravity and sulfur bank fees or credits,
provided said charges are not included in
the price paid to the supplier; plus or
minus as applicable (iii) all trading
differentials for the month of delivery as
published by Platt's for the respective
quality from the trading locations into WTI
at Cushing, Oklahoma; plus (iv) any
reasonable and customary accounting
adjustments necessary due to volume
imbalances or other factors; plus (v) any
monthly administrative fees paid under the
Contracts.
GWEC shall account to Giant for any
rebates/additional charges when received or
paid.
PLEASE RETURN WHITE COPY TO GIANT REFINING COMPANY. THANK YOU.
GARY-WILLIAMS ENERGY CORPORATION (GWEC)
BY_____________________________________
GIANT REFINING COMPANY (GIANT)
BY_____________________________________
SCHEDULE 1.01.1
EARNOUT
This Schedule 1.01.1 is part of the Purchase and Sale
Agreement (the "PURCHASE AGREEMENT") among Bloomfield Refining
Company, a Delaware corporation ("BRC"), Gary-Williams Energy
Corporation, a Delaware corporation ("GWEC") (collectively,
"SELLERS"), and Giant Industries Arizona, Inc. ("BUYER") and
provides for the payment by Buyer of an Earnout, as defined in the
Purchase Agreement for the Refinery.
ARTICLE I
DEFINITIONS
As used in this Schedule, the following terms shall have the
following meanings.
"AFFILIATE" when used with respect to any person, shall mean
any entity directly or indirectly controlling, controlled by or
under common control with such person.
"CINIZA REFINERY" shall mean that refinery owned by Buyer
located near Gallup, New Mexico.
"DEEMED DAILY REFINERY CAPACITY" shall mean 14,700 barrels per
day for calendar years 1997 and 2001, and 16,000 barrels per day
for all other periods. Subject to the provisions of Section 5.01
regarding Force Majeure, the Deemed Daily Refinery Capacity shall
be used to determine the Earnout Payment as provided below
regardless of the actual level of production from or capacity of
the Refinery or the Ciniza Refinery.
"EFFECTIVE TIME" shall have the meaning ascribed to such term
in the Purchase Agreement.
"FORCE MAJEURE" shall mean any cause or causes beyond the
control of Buyer that materially prevents Buyer from operating
either the Refinery or the Ciniza Refinery in the same manner that
it had been operating the refineries prior to the occurrence of
such cause, including but not limited to the following: acts of
God; fire; storm; flood; earthquake; wash outs; explosions;
accidents; acts of public enemy; rebellion; strikes; lock-outs;
disputes or differences with workmen; labor shortages; industry
disturbances; failure of power or utilities; interruption,
disruption or breakdown of supply, production, manufacture,
storage, transportation, sales, distribution, or delivery; breakage
or accident to machinery, equipment or pipelines; and restrictions
or restraints imposed by law or by rule, regulation or order of
governmental authorities, whether federal, state or local (but not
including any increased costs of compliance with existing or future
laws, rules, regulations or orders); provided, however, that
neither lack of money, changes in market conditions nor reduced
availability of raw materials due to natural decline or increased
costs of raw materials shall constitute Force Majeure.
"GIANT" shall mean Giant Industries, Inc., a Delaware
corporation.
"REFINERY MARGIN" shall mean the refinery-sourced revenues
(including all business interruption insurance proceeds
attributable to the Refinery or the Ciniza Refinery that Buyer
accrues) less the associated cost of revenues, stated on a per
barrel basis for the refinery-sourced sales barrels. The Refinery
Margin will be the weighted average for both the Ciniza Refinery
and the Refinery. The Refinery Margin calculation shall be based
on generally accepted accounting principles applied consistently
with Buyer's historical practices used in calculating the "Refinery
Margin" that Buyer currently reports in its public filings with the
Securities and Exchange Commission.
The Refinery Margin shall be calculated based on
refinery-sourced sales barrels. Refinery-sourced sales barrels
shall include refinery direct sales, Affiliate sales, exchange
sales, and any other disposition for value, but not outside
purchases of finished products (i.e., the number of barrels of such
outside products shall not be included in the number of barrels of
refinery-sourced sales barrels in determining the per barrel
Refinery Margin). Refinery-sourced revenues shall consist of the
revenues from sales of the various finished petroleum products
manufactured by the applicable refinery and sold, all of which
shall be reflected in Buyer's billing system including sales to
Affiliates. Revenues shall be adjusted for rebates and credits.
Finished product freight and superfund tax and other taxes
collected by Buyer (but not taxes levied on the Buyer, e.g. income
taxes, etc.) shall be reductions to revenues. Differential income
on product exchanges shall also be included in revenues.
Cost of revenues shall consist of the purchase of raw
materials to be manufactured at the refineries (excluding
chemicals, operating expenses and catalysts). Raw material cost
includes all freight to move the raw materials to the refineries
and gains or losses resulting from hedging contracts associated
with raw materials. Outside purchases of finished product (net of
revenues) shall be included in cost of revenues. Gains or losses
from raw materials exchanges shall be included in cost of revenues
(including as gains all payments to Buyer by GWEC under that Crude
Oil Contract to be executed by GWEC and Buyer pursuant to Section
7.03(k) of the Purchase Agreement. Inventory changes shall also be
reflected in the cost of revenues and shall be stated at the lower
of cost or market with cost determined by the last-in, first-out
method of accounting. Finished products shall be valued in
inventory based on a relative sales value method. Gains and losses
resulting from speculative contracts associated with raw materials
or finished products shall not be included in cost of revenues.
Produced fuel consumed in refinery operations shall be included in
refinery-sourced revenues and in the cost of revenues so as to have
no effect on the Refinery Margin.
Affiliates of Buyer may supply raw materials, purchase
finished products from Buyer, and provide associated transportation
services. Transactions with Affiliates shall continue to be priced
competitively with similar bona fide arms' length transactions and
in a manner consistent with Buyer's historical practices. The
transportation cost for crude oil shipped through the Pipeline
shall be the tariff charge, as in effect from time to time,
provided that Buyer may seek increases in the tariff charge only to
reflect increased Pipeline operating or capital costs determined in
a manner consistent with the manner in which the tariff has
historically been set for the Pipeline.
If the Ciniza Refinery ceases to be owned by Buyer or an
Affiliate of Buyer, the Refinery Margin shall be calculated by
reference to the Refinery only and not the Ciniza Refinery.
"PERMITTED LIEN" shall mean the following:
(i) liens for taxes or assessments not yet delinquent
or, if delinquent, that are being contested in good
faith in the ordinary course of business and which
have been reserved against if required by generally
accepting accounting practices consistently applied;
(ii) materialman's, mechanic's, repairman's, employee's,
contractor's, operator's and other similar liens or
charges arising in the ordinary course of business
securing amounts not yet due and payable and which
have been reserved against if required by generally
accepting accounting practices consistently applied;
(iii) liens, burdens and encumbrances burdening the
Refinery or the Pipeline at the time the same are
conveyed to Buyer; and
(iv) easements, rights-of-way, and servitudes that do not
interfere materially with the operation of the
affected asset.
"PIPELINE" shall mean the raw materials pipeline located in
San Juan County, New Mexico delivering crude oil to the Refinery.
"REFINERY" shall mean the refinery commonly known as the
Bloomfield Refinery located near Bloomfield, New Mexico.
ARTICLE II
EARNOUT
2.01 EARNOUT PAYMENTS. On or before 90 days after the end of
each calendar year commencing with 1995, Buyer shall pay to BRC by
wire transfer at such account as BRC may specify, an amount (the
"EARNOUT PAYMENT") determined as follows:
(a) If the Refinery Margin is $4.25 or less for the
applicable period, no Earnout Payment shall be due.
(b) If the Refinery Margin is greater than $4.25 but
less than or equal to $6.25 for the applicable period, the Earnout
Payment shall equal (i) 60% of the amount by which the Refinery
Margin exceeds $4.25, MULTIPLIED BY (ii) the sum of the Deemed
Daily Refinery Capacity for each day of the applicable period.
(c) If the Refinery Margin exceeds $6.25 for the
applicable period, the Earnout Payment shall equal (i) (A) $1.20,
plus (B) 80% of the amount by which the Refinery Margin exceeds
$6.25, MULTIPLIED BY (ii) the sum of the Deemed Daily Refinery
Capacity for each day of the applicable period.
(d) The "applicable period" shall be (i) the period from
the Effective Time through December 31, 1995, (ii) each calendar
year thereafter, and (iii) if the Buyer's obligation to make
Earnout Payments terminates pursuant to Section 2.02(b) other than
on January 1 of a calendar year, the period from January 1 through
the day such obligation terminates.
(e) The Earnout Payment shall be calculated in
accordance with the terms of this Schedule 1.01.1 using generally
accepted accounting principles as applied to the refineries'
operations, consistently applied from period to period.
(f) A sample calculation of the Earnout Payment is set
forth on Exhibit 2.01(f) hereto.
(g) If all or substantially all of the Refinery is
destroyed by fire or other casualty or taken by condemnation, and
the Buyer decides to not replace or rebuild the Refinery, Buyer
shall pay to BRC an amount equal to BRC's Share of any insurance
proceeds, damage awards and condemnation awards received by Buyer
relating to such occurrence or taking. "BRC's Share" shall be a
fraction whose numerator shall be 25 multiplied by 1.5 multiplied
by the number of Remaining Days and whose denominator shall be (i)
80 multiplied by (ii) the number of days from the Effective Time
through December 31, 2001 plus the aggregate number of Force
Majeure Days that occurred between the Effective Time and the
casualty event or taking; provided that BRC's Share shall not
exceed 25/80ths. The "Remaining Days" shall be the number of days
from the casualty or taking through December 31, 2001 plus the
aggregate number of Force Majeure Days that occurred between the
Effective Time and the casualty event or taking. Such payment to
BRC shall be treated as an Earnout Payment. Upon receipt of such
payment, the obligation of the Buyer to make Earnout Payments shall
terminate.
(h) BRC shall have the right to assign its rights under
this Schedule 1.01.1 to any of its or GWEC's Affiliates, subject to
the Buyer's right of setoff.
2.02 TERMINATION.
(a) Buyer's obligation to make the Earnout Payments
shall terminate when BRC has received Earnout Payments with an
aggregate net present value (as of the Effective Time) of
$25,000,000.00 using a discount rate of 9.75% per annum. Each
Earnout Payment shall be discounted from the date it is actually
received by BRC to the Effective Time. Buyer will have the right
to prepay Earnout Payments using a net present value discount rate
of 9.75% per annum.
(b) The Earnout Payment shall accrue and be payable with
respect to the period commencing at the Effective Time and
continuing through and including December 31, 2001 plus a period
equal to the aggregate number of Force Majeure Days as described in
Section 5.01.
(c) A sample calculation of the net present value of an
assumed hypothetical series of Earnout Payments, and the
application of the extension for Force Majeure Days as described in
Section 5.01 is set forth in Exhibit 2.012(f).
ARTICLE III
COVENANTS
3.01 COVENANTS OF BUYER. At all times from the date hereof
until the termination of Buyer's obligation to make Earnout
Payments, Buyer shall:
(a) Conduct its operations in good faith so as not to
subvert the intent of the parties herein.
(b) Not mortgage, pledge or hypothecate the Pipeline or
the Refinery or create or allow to remain thereon any lien, charge
or encumbrance of any character, except Permitted Liens.
(c) Not assign, sell, convey or otherwise transfer the
Refinery (and Giant will not and will not permit its Affiliates, to
sell, exchange, or transfer by merger or otherwise a controlling
interest in the voting stock of the Affiliate of Giant owning the
Refinery) other than to an Affiliate of Giant, unless in either
case BRC expressly consents thereto in writing, the transferee
expressly agrees to assume and perform all of Buyer's obligations
under this instrument and such sale, lease, conveyance, transfer or
assignment is made and accepted expressly subject and subordinate
to this instrument. Buyer shall remain liable for all of its
obligations under this Schedule 1.01.1 notwithstanding any such
sale, transfer or assignment.
(d) Not subcontract or otherwise allow any third party
to operate the Refinery, until and unless the successor operator
has been approved in writing by BRC, which approval will not be
unreasonably withheld, or unless Buyer remains ultimately
responsible for the operation of the Refinery.
(e) Permit authorized representatives of BRC, at a
reasonable time based on reasonable notice, but at BRC's risk and
expense, to inspect the Refinery.
3.02 INCORPORATION OF INDENTURE COVENANTS-NO CHANGE OF
CONTROL. Giant and Buyer hereby incorporate by reference their
covenants set forth in Articles Four and Five of that Indenture
attached hereto as Exhibit 3.02 and hereby make such covenants to
BRC.
3.03 REMEDIES. Until the time the Buyer has fully discharged
its obligation to make Earnout Payments, if Buyer shall fail to
perform or observe, in any material respect, any of its obligations
or covenants, BRC may recover damages and seek other remedies
available to BRC at law or in equity.
ARTICLE IV
REPORTING
4.01 REPORTS. Buyer shall deliver to Seller the following
statements and reports:
(a) Quarterly, within 45 days after the end of each
quarter for which such report is given and to the extent such
information is available, a report reflecting the calculation of
Refinery Margin for the quarter and year-to-date.
(b) With each Earnout Payment, of if no Earnout Payment
is due, a statement, prepared and certified by Buyer's Chief
Financial Officer, together with the supporting detail, reflecting
the calculation of Refinery Margin and the Earnout Payment for the
applicable period.
4.02 AUDITS.
(a) BRC, or it designated independent auditing firm,
shall have the right to review and audit the books and records of
Buyer respecting the calculation of Refinery Margin. Buyer shall
provide BRC with any information required to determined Refinery
Margin. Except as provided in Section 4.03(e), BRC shall bear the
costs of any audit conducted by it. BRC shall maintain the
confidentiality of all non-public information relating to Buyer or
the refineries.
(b) Each Earnout Payment shall be final unless BRC gives
written objection following completion of its audit, as described
in Section 4.02(a), within one year after the Earnout Payment.
(c) All late payments of Earnout Payments and all
amounts found to be due to BRC shall bear interest at the lesser of
15 percent per annum and the maximum legal rate. If BRC objects,
the Earnout Payment shall not be final until it is resolved by
agreement of the parties or arbitration pursuant to Section 4.03.
If Buyer pays the interest due on a late Earnout Payment or other
amounts found to be due, the net present value of such Earnout
Payment for purposes of Section 2.02(a) shall be determined by
discounting such Earnout Payment from the date on which it was due
and payable, notwithstanding that it was later paid.
4.03 ARBITRATION.
(a) The parties agree to submit all controversies,
claims and matters of difference relating to the determination of
Earnout Payments to arbitration.
(b) The party desiring arbitration shall so notify the
other party, identifying in reasonable detail the matters to be
arbitrated and the relief sought. Arbitration hereunder shall be
by a partner or member in a neutral national certified public
accounting firm not affiliated with either party. The American
Arbitration Association ("AAA") shall submit a list of persons
meeting the criteria outlined above and the parties shall mutually
agree upon the arbitrator. In the event that the parties fail to
select an arbitrator as required above, the AAA shall select the
arbitrator.
(c) All matters arbitrated hereunder shall be arbitrated
in Albuquerque, New Mexico and shall be governed by New Mexico law.
Arbitration shall be conducted in accordance with the Commercial
Arbitration Rules of the AAA, except to the extent such Rules
conflict with the express provisions of this Section 4.03 (which
shall prevail in the event of such conflict). The arbitrator shall
conduct a hearing no later than 60 days after submission of the
matter to arbitration, and a decision shall be rendered by the
arbitrator within 30 days of the hearing.
(d) This submission and agreement to arbitrate shall be
specifically enforceable.
(e) If the arbitration award reflects an underpayment of
the disputed Earnout Payment by an amount greater than five percent
of the correct amount, Buyer shall pay the AAA's fees, the
arbitrator's fees, and BRC's audit costs and attorneys' and
experts' fees, provided those fees are reasonable. BRC shall pay
the AAA's fees, the arbitrator's fees, and the Buyer's attorneys'
and experts' fees (provided those fees are reasonable), if the
arbitration award reflects that the disputed Earnout Payment was
equal to or greater than the correct amount. BRC shall pay the
AAA's fees and the arbitrator's fees, and each Party shall pay its
own attorneys' and experts' fees, if the arbitration award reflects
an underpayment of the disputed Earnout Payment by an amount up to
five percent of the correct amount.
ARTICLE V
MISCELLANEOUS
5.01 FORCE MAJEURE. In the event that Buyer is rendered
unable by reason of an event of Force Majeure to operate the
Refinery and the Ciniza Refinery at a combined production level of
at least 32,000 barrels of refined products per day, Buyer shall
give BRC written notice and full particulars of any event of Force
Majeure within 10 days thereafter. Each such day so specified in a
timely notice from Buyer shall be called a "FORCE MAJEURE DAY"
provided that no such day for which Buyer receives business
interruption insurance (without regard to the amount of such
coverage) shall be a Force Majeure Day. Except as provided in
Section 2.01(g), Buyer shall remedy Force Majeure conditions as
soon as reasonably possible, including repairing or rebuilding the
Refinery and the Ciniza Refinery.
5.02 TREATMENT FOR TAX PURPOSES. BRC and Buyer shall treat
and report the Earnout Payments under the installment method of
accounting for taxation purposes within the meaning of section 453
of the Internal Revenue Code and as "non-quotable contingent
payout" within proposed Treas. Reg. S.S. 1.1275-4(c)(4).
5.03 NOTICES. All notices and communications required or
permitted under this Schedule 1.01.1 shall be in writing and shall
be addressed as follows:
IF TO SELLERS:
Bloomfield Refining Company
Gary-Williams Energy Corporation
370 Seventeenth Street, Suite 5300
Denver, Colorado 80202
Attention: David J. Younggren
IF TO BUYER:
Giant Industries Arizona, Inc.
23733 North Scottsdale Road
Scottsdale, Arizona 85254
Attention: Frederic L. Holliger
5.04 AMENDMENT. This Schedule 1.01.1 may not be altered or
amended, nor any rights hereunder be waived, except by an
instrument in writing executed by the party or parties to be
charged with such amendment or waiver.
5.05 GOVERNING LAW. This Schedule 1.01.1 and the transactions
contemplated hereby shall be construed in accordance with, and
governed by, the laws of the State of New Mexico.
5.06 LEGAL RATE. Notwithstanding anything to the contrary
herein, no portion of any payment made hereunder that is treated as
interest for purposes of any usury or other limitation on the rate
of interest that may be charged shall exceed the maximum legal rate
permitted under applicable law, and, if any such rate is found to
exceed the maximum legal rate, Buyer shall be required to pay only
the maximum legal rate.
Exhibit 2.0100
Sample calculations of the Earnout Payment
Example Year 1996 1996
--------- ---------
Base margin 4.25 4.25
Example margin 6.25 6.75
Difference 2.00 2.50 2.00 0.50
---------
Earnout percentage 60% 60% 60%
Earnout margin 1.20 1.20 0.40
--------- --------- ---------
"Deemed Daily Refinery Capacity" 16,000 16,000 16,000
Number of days 366 365 365
Annual refinery capacity 5,840,000 5,840,000 5,840,000
========= ========= =========
"Earnout Payment" 7,008,000 9,344,000 7,008,000 2,336,000
========= ========= ========= =========
Exhibit 2.0200
Sample calculation of the net present value of an assumed
hypothetical series of Earnout Payments
Net
Present
1997 1998 1999 2000 2001 2002 Value
--------- --------- --------- --------- --------- ---- -------
Assumed "Earnout Payments"
1996 7,008,000 6,385,421
1997 0 6,438,600 5,345,427
1998 0 0 7,008,000 5,301,277
1999 0 0 0 7,008,000 4,830,321
2000 0 0 0 0 4,995,901 3,137,554
2001 0 0 0 0 0 0 0
25,000,000
Note 1: Assumed "Effective Time" is January 1, 1996
Note 2: Assumed "Earnout Payment" date is January 1 of each
subsequent year
Example of application of the extension for Force Majeure Days
If an explosion at the Refinery shuts it down for a period of 45
days in 1996, and the deductible period for business interruption
insurance is 15 days, then the Earnout Payment period is extended
through January 15, 2002. If the explosion was not covered by
business interruption insurance, then the Earnout Payment period is
extended through February 14, 2002. In the first example, the
Force Majeure Days are 15 days since that is the period not
covered by business interruption insurance. In the second example,
the Force Majeure Days are 45 days since the incident was not
covered by business interruption insurance. In either case, the
complete cessation of production at the Refinery would reduce the
combined production level of both refineries to less than 32,000
barrels of refined products per day.
Prior to the Closing, the parties shall jointly expand Exhibit
2.01(f) to explain in reasonable detail the computation of Refinery
Margin for the Refinery and the Ciniza Refinery using the
accounting information for calendar year 1994.
SCHEDULE 1.01.2
Excluded Contracts
CONTRACT
DESCRIPTION PARTIES DATE NOTES
Crude Purchase Gary-Williams Energy 6/1/87 Amendment #28
Contract-On Shore Corporation ("GWEC")
and U.S. Minerals
Management Service
("MMS")
Crude Purchase GWEC and U.S. MMS 10/14/94
Contract-Royalty-
in-Kind
Crude Contract GWEC and Conoco 9/6/90
Crude Contract GWEC and Unocal Refining 12/9/94
& Marketing Division
Crude Contract GWEC and Texaco Trading 6/29/90
and Transportation Inc.
Crude Contract GWEC and Shell Oil 3/2/95
Company
Crude Contract GWEC and Amoco 8/16/94
Production Company
Crude Contract GWEC and Conoco Inc. 5/22/95
Crude Contract GWEC and Mobil Oil 6/20/91
Corporation
Marketing Agreement GWEC and Bloomfield 7/1/91
Refining Company
Management Agreement GWEC and Bloomfield 7/1/91
Refining Company
SCHEDULE 1.01.3
PROCESSING UNITS, SHIPPING FACILITIES AND TERMINALS
REFINERY UNITS
Crude Distillation Unit.
Catalytic Reforming Unit.
Fluid Catalytic Cracking Unit (FCCU).
Catalytic Polymerization (Cat/Poly) Unit.
Distillate Hydrotreater.
Naphtha Hydrotreater.
Sulfur Recovery Unit.
Merox Treaty Unit (LPG).
Merox Treaty Unit (Jet Fuel).
SUPPORTING REFINERY FACILITIES
Refinery Tankage: 630,000 barrels of total storage, along with
additive addition systems.
Crude Oil and Other Product Truck Unloading Facilities: Five truck
unloading stations.
Product Truck Loading: Four-bay product truck terminal, with
cardlock, mixing, additive, computer and other peripheral systems.
Office and Lab: Laboratory facility and an office building.
Fire and Safety Systems: The fire fighting system, includes
process area, tank farm, product rack, and crude and LPG unloading
area fire loop headers, a 65,000 barrel firewater reservoir tank
and a 1500 gpm diesel-driven firewater pump.
Steam Generation Systems: Water Treatment System and two natural
gas fired boilers for steam generation.
Cooling Water System: Two main cooling towers, water distribution
and treating systems.
Electrical System.
Process Water Disposal System.
Maintenance and Warehouse Facilities.
Vapor Relief and Flare System.
SCHEDULE 1.01.4
REFINERY SITE
The South One-Half of the Northwest Quarter (S1/2NW1/4); The
Northeast Quarter of the Southwest Quarter (NE1/4SW1/4); The North
One-Half of the Northwest Quarter of the Southwest Quarter
(N1/2NW1/4SW1/4) and the Southeast Quarter of the Northwest Quarter
of the Southwest Quarter (SE1/4NW1/4SW1/4) of Section 26;
AND
The Southeast Quarter of the Northeast Quarter (SE1/4NE1/4)
and the North One-Half of the Northeast Quarter of the Southeast
Quarter (N1/2NE1/4SE1/4) of Section 27;
AND
The West One-Half of the Northeast Quarter (W1/2NE1/4) of
Section 27;
EXCEPT the following part of said tract, to wit:
BEGINNING at the Northwest corner of said tract;
THENCE South 30 feet;
THENCE east parallel to the north line of said tract, 676.6 feet;
THENCE North 30 feet;
THENCE West along the North line of said tract 676.6 feet to the
place of beginning.
AND;
BEGINNING at a point which is 826.08 feet North 31 degrees 16'
East from the West Quarter Corner of said Section 27;
THENCE North 7 degrees 55' East 135.0 feet along the East Right of
Way of State Highway #44;
THENCE South 82 degrees 05' East 161.3 feet;
THENCE South 7 degrees 55' West 135.0 feet;
THENCE North 82 degrees 05' West 161.3 feet to the point of
beginning.
AND;
A tract of land situated in the Southeast Quarter of the
Northwest Quarter (SE1/4NW1/4) of said Section 27, more
particularly described as follow:
BEGINNING at a point which is the center of said SECTION 27;
THENCE N 00 degrees 23' 49" E along the North-South Centerline of
Section 27, a Distance of 554.30 feet, more or less, to a point on
the Easterly Right of Way of the Hammond Canal as described in
the San Juan County records in Book 633, Page 243B (Parcel No.
HMC);
THENCE Southwesterly along a non-tangent curve to the left as
described in said description 90 feet, more or less;
THENCE South 04 degrees 21' 30" West along a line tangent to said
curve 487.17 feet, more or less, along the Easterly Right of Way
line of the Hammond Canal to a point on the East-West Centerline of
Section 27;
THENCE North 89 degrees 24' 29" East 79.81 feet along said
East-West Centerline to the point of beginning.
All in Township 29 North of Range 11 West, N.M.P.M., San Juan
County, New Mexico.
SCHEDULE 1.01.5
REFINERY SITE ENCUMBRANCES
1. Taxes for the year 1995, and thereafter.
2. Reservations contained in U.S. Patent recorded in Book 59,
Page 222 and in Book 48, Page 270 all of the San Juan County
Records.
3. Right of Way Easement from Austin A. Davis, a single person to
El Paso Natural Gas Company, dated March 13, 1951, recorded
January 11, 1952 in Book 172, Page 367 of the San Juan County
Records.
4. Right of Way Easement From August A. Davis to El Paso Natural
Gas Company dated September 22, 1952, recorded November 6,
1952 in Book 192, Page 171 of the San Juan County Records.
5. Right of Way Easement from Austin A. Davis, a single person to
El Paso Natural Gas Company, dated November 29, 1957, recorded
December 12, 1957 in Book 352, Page 126 of the San Juan County
Records.
6. Oil and Gas Lease between Austin A. Davis, single and Al
Greer, dated April 18, 1957, recorded January 2, 1958 in Book
351, Page 154 of the San Juan County Records. Any subsequent
assignments thereof.
7. Order Amending Decree Incorporating Hammond Conservancy
District in the District Court to the Public dated December 1,
1958, recorded December 2, 1958 in Book 396, Page 85 of the
San Juan County Records, and the decrees and orders referred
to therein.
8. Right of Way Easement from France R. Bryan and Jo Claire
Bryan, husband and wife to El Paso Natural Gas Company, dated
June 14, 1961, recorded June 19, 1961 in Book 487, Page 42 of
the San Juan County Records.
9. Grant of Right of Way Easement by and between F.R. Bryan and
Jo Claire Bryan, husband and wife and San Juan County, New
Mexico, dated November 26, 1962, recorded November 30, 1962 in
Book 536, Page 271 of the San Juan County Records.
10. Right of Way Easement by and between Buster Webb and Mrs.
Buster Webb, husband and wife and The City of Farmington
Electric Utility System and the Mountain States
Telephone & Telegraph Company, dated February 11, 1970,
recorded April 24, 1970 in Book 681, Page 594 of the San Juan
County Records.
11. Amended Easement by and between A.R. Webb and Barbara Webb;
F.M. Webb and Betty Webb and El Paso Natural Gas Company,
dated August 4, 1970, recorded September 21, 1970 in Book 686,
Page 345 amending easement recorded in Book 487,
Page 42 all of the San Juan County Records.
12. Ratification Agreement of Grant of Easement by A.R. Webb and
Barbara S. Webb, his wife to MAPCO, Inc., dated August 26,
1974 recorded September 23, 1974 in Book 733, Page 154 of the
San Juan County Records.
13. Grant of Easement from A.R. Webb and Barbara S. Webb, his wife
to MAPCO, Inc., a Delaware Corporation dated July 11, 1974,
recorded August 9, 1974 in Book 737, Page 55 of the San Juan
County Records.
14. Right of Way Easement from W.L. Dooley, Vice President of
Plateau, Inc., to El Paso Natural Gas Company, dated June 9,
1980, recorded July 7, 1980, in Book 885, Page 435 of the San
Juan County Records.
15. Right of Way Easement from W.L. Dooley, Vice President of
Plateau, Inc., to El Paso Natural Gas Company, dated June 9,
1980, recorded July 7, 1980 in Book 885, Page 436 of the San
Juan County Records.
16. Right of Way Easement from W.L. Dooley, Vice President of
Plateau, Inc. to El Paso Natural Gas Company, dated June 9,
1980, recorded August 5, 1980 in Book 888, Page 404 of the San
Juan County Records.
17. Right of Way Easement from Plateau, Inc., to Union Texas
Petroleum Corporation, dated April 2, 1983, recorded April 22,
1983 in Book 962, Page 532 of the San Juan County Records.
18. Right of Way Easement by and between Plateau, Inc., by W.L.
Dooley, Vice President and The City of Farmington Electric
Utility System and the Mountain States Telephone & Telegraph
Company, dated May 11, 1984, recorded June 27, 1984 in Book
996, Page 153 of the San Juan County Records.
19. Right of Way Easement from W.L. Dooley, Vice President of
Plateau, Inc., to Northwest Pipeline Corporation, dated July
17, 1984, recorded August 3, 1984 in Book 999, Page 226 of the
San Juan County Records.
20. Right of Way Easement from Austin A. Davis, a single person,
to El Paso Natural Gas Company, dated January 20, 1956,
recorded February 6, 1956 in Book 295, Page 52 of the San Juan
County Records.
21. Right of Way Easement by and between Kimbell-Campbell Corp.,
and the Basin Light and Power Company and Mountain States
Telephone & Telegraph Company, dated January 27, 1959,
recorded April 14, 1959 in Book 414, Page 35 of the San Juan
County Records.
22. Grant of Right of Way Easement by and between F.R. Bryan and
Jo Claire Bryan, husband and wife, and County of San Juan, New
Mexico, dated November 27, 1962, recorded November 30, 1962 in
Book 536, Page 272 of the San Juan County Records.
23. Amended Right of Way Easement between Plateau, Inc., by O. L.
Garretson, President and El Paso Natural Gas Company, dated
July 7, 1970, recorded September 21, 1970, in Book 686, Page
346 of the San Juan County Records.
24. Amending easement recorded in Book 487, Page 42 of the San
Juan County Records.
25. Partial Assignment of Right of Way from Southern Union Gas
Company to Southern Union Gathering Company, dated January 1,
1964, recorded March 4, 1964 in Book 574, Page 67 of the San
Juan County Records.
26. Amendment of Partial Assignment of Right of Way between
Southern Union Gathering Company, dated February 25, 1964,
recorded March 20, 1964 in Book 574, Page 109 amending right
of way recorded in Book 574, Page 67 all of the San Juan
County Records.
27. Right of Way Easement by and between Plateau, Inc., and the
City of Farmington Electric Utility System and the Mountain
States Telephone & Telegraph Company, dated June 14, 1976,
recorded August 2, 1976 in Book 770, Page 303 of the San Juan
County Records.
28. Right of Way Easement by and between Plateau, Inc., and the
Mountain States Telephone & Telegraph Company, dated July 23,
1976, recorded September 15, 1976 in Book 773, Page 437 of the
San Juan County Records.
29. Grant of Right of Way Easement by and between Plateau, Inc.,
and Joe M. Kaime and Wilma Jean Kaime, husband and wife, dated
March 1, 1977, recorded June 15, 1978 in Book 790, Page 286 of
the San Juan County Records.
30. Assignment from El Paso Natural Gas Company to Shell Pipe Line
Corporation, dated December 29, 1977, recorded February 24,
1978, in Book 797, Page 203 of the San Juan County Records.
31. Assignment from Shell Pipe Line Corporation to Plateau, Inc.,
a New Mexico Corporation and Thriftway Oil Company, a New
Mexico Corporation, dated March 29, 1978, recorded May 23,
1978 in Book 826, Page 533 of the San Juan County Records.
32. Grant of Right of Way Easement by and between Plateau, Inc.,
and Joe W. Kaime and Wilma Jean Kaime, husband and wife, dated
June 14, 1979, recorded August 22, 1979 in Book 861, Page 474
to correct right of way recorded in Book 790, Page 286 all of
the San Juan County Records.
33. Right of Way Easement from W.L. Dooley, Vice President of
Plateau, Inc., to El Paso Natural Gas Company, dated June 9,
1980, recorded July 24, 1980 in Book 888, Page 194 of the San
Juan County Records.
34. Assignment from Giant Industries, Inc., an Arizona
Corporation, to Ciniza Pipe Line, Inc., a New Mexico
Corporation, dated May 1, 1983, recorded May 6, 1983 in Book
965, Page 229 of the San Juan County Records.
35. Notice of Right of Way from the United States for the
construction of the Hammon Main Canal, dated July 12, 1983,
recorded July 12, 1983 in Book 970, Page 220 of the San
Juan County Records.
36. Reservations contained in U.S. Patent recorded in Book 2, Page
240 of the San Juan County Records.
37. Right of Way Easement from Lloyd D. Fitts, a single person, to
El Paso Natural Gas Company, dated January 15, 1953, recorded
March 14, 1953 in Book 203, Page 166 of the San Juan County
Records.
38. Right of Way Easement from Lloyd D. Fitts, a single person, to
El Paso Natural Gas Company, dated January 19, 1956, recorded
February 6, 1956, in Book 295, Page 53 of the San Juan County
Records.
39. Oil and Gas Lease between Grace Irene Pearce, a single woman
and Enid M. (Neibaur) Price, dated August 3, 1957, recorded
August 5, 1957 in Book 338, Page 194 of the San Juan County
Records.
40. Oil and Gas Lease between Grace Irene Pearce, a single woman
and Enid M. (Neibaur) Price, dated July 27, 1957, recorded
July 29, 1957 in Book 338, Page 140 corrected in Book 338,
Page 194 all of the San Juan County Records. Any subsequent
assignments thereof.
41. Right of Way Easement by and between Grace Irene Pearce,
divorced and the Basin Light and Power Company and Mountain
States Telephone & Telegraph Company, dated June 13, 1958,
recorded June 30, 1958 in Book 375, Page 261 of the San Juan
County Records.
42. Agreement by and between Grace Pearce and Pete Roberts, doing
business as Pete Roberts Construction Company, dated January
13, 1959, recorded February 2, 1959 in Book 404, Page 71 of
the San Juan County Records.
43. Assignment of Lease from Pete Roberts, doing business as Pete
Roberts Construction Company, to Bloomfield Sand & Gravel,
Inc., dated January 30, 1959, recorded February 2, 1959 in
Book 404, Page 72, assignment agreement recorded in Book 404,
Page 71 all of the San Juan County Records.
44. Right of Way Easement by and between Grace Pearce, a single
woman and the Basin Light and Power Company and Mountain
States Telephone & Telegraph Company, dated December 3, 1958,
recorded January 28, 1959, in Book 402, Page 273 of the San
Juan County Records.
45. Lease Amendment between Grace Pearce and Pete Roberts dated
March 3, 1959, recorded March 16, 1959 in Book 409, Page 164
amending lease recorded in Book 404, Page 71 all of the San
Juan County Records.
46. Assignment of Lease from Bloomfield Sand & Gravel, Inc., to
River Sand & Gravel Co., a New Mexico Corporation, dated March
3, 1959, recorded March 16, 1959 in Book 409, Page 165
assigning lease recorded in Book 404, Page 71 and assigned in
Book 404, Page 72 all of the San Juan County Records.
47. Right of Way Easement by and between Grace Irene Pearce
divorced and the Town of Farmington Electric System and
Mountain States Telephone & Telegraph Company, dated May 25,
1959, recorded September 21, 1959 in Book 430, Page 103 of the
San Juan County Records.
48. Contract Compensating Landowner for Government use of reserved
right of way between the United States of America and Plateau,
Inc., dated November 25, 1966, recorded January 24, 1967 in
Book 645, Page 66 of the San Juan County Records.
49. Lease for Sand and Gravel by and between Donald L. Mangum and
Myrna J. Mangum and Alcora Materials Company, dated March 9,
1973, recorded July 7, 1973 in Book 752, Page 113 of the San
Juan County Records.
50. Assignment of Lease between Alcora Materials Company and Arco
Materials, Inc., dated April 14, 1977, recorded April 15,
1977, in Book 780, Page 549 assigning lease dated March 9,
1973 all of the San Juan County Records.
51. Right of Way Easement by and between Plateau, Inc., and the
City of Farmington Electric Utility System and the Mountain
States Telephone & Telegraph Company, dated August 12, 1977,
recorded September 8, 1977 in Book 796, Page 66 of the San
Juan County Records.
52. Lease for Sand & Gravel by and between Donald L. Mangum and
Myrna J. Mangum and Alcora Materials Company, dated March 9,
1973, recorded September 10, 1980 in Book 886, Page 443 of the
San Juan County Records.
53. Right of Way Easement from W.L. Dooley, Vice President of
Plateau, Inc., to the Mountain States Telephone & Telegraph
Company, dated November 3, 1980, recorded November 7, 1980 in
Book 895, Page 534 of the San Juan County Records.
54. Right of Way by and between Plateau, Inc., by R.G. Perry
Executive Vice President and the City of Farmington Electric
Utility System and the Mountain States Telephone & Telegraph
Company, dated September 10, 1982, recorded October 14, 1982
in Book 944, Page 420 of the San Juan County Records.
55. Right of Way Easement by and between Plateau, Inc., by Lee S.
Woodside, Vice President of Refining and the City of
Farmington Electric Utility System and the Mountain States
Telephone & Telegraph Company, dated March 16, 1983, recorded
April 5, 1983 in Book 962, Page 234 of the San Juan County
Records.
56. Right of Way deed from J.T. Lynn, Administrator, estate of
John P. Lynn, deceased, Fred L. Lawson and Grace P. Lawson,
his wife to Southern Union Production Company of New Mexico
dated September 3, 1932, recorded September 16, 1932 in Book
91, Page 69 of the San Juan County Records.
57. Right of Way Grant from Fred L. Lawson and Grace Lawson, his
wife to New Mexico Gas Company, dated January 18, 1940,
recorded January 18, 1940 in Book 102, Page 53 of the San Juan
County Records.
58. Right of Way from Joe Mangum to Mountain States Telephone &
Telegraph Co., dated June 15, 1945, recorded October 8, 1945
in Book 102, Page 630 of the San Juan County Records.
59. Oil and Gas Lease by and between Joe Mangum and Mamie Mangum
and Southern Union Production Company, dated August 30, 1946,
recorded May 20, 1946 in Book 89, Page 819 of the San Juan
County Records. Any Subsequent Assignments thereof.
60. Right of Way Easement by and between Mamie Mangum, a single
person and the Basin Light and Power Company, dated October
19, 1954, recorded October 25, 1984 in Book 259, Page 159 of
the San Juan County Records.
61. Right of Way Easement by and between Mamie Mangum, a widow and
Plateau, Inc., dated May 18, 1960, recorded May 18, 1960 in
Book 453, Page 16 of the San Juan County Records.
62. Right of Way Easement by and between Harvey Salmon and Eva S.
Salmon, husband and wife and Plateau, Inc., dated June 29,
1960, recorded August 4, 1960 in Book 459, Page 93 of the San
Juan County Records.
63. Right of Way Easement by and between Mamie Mangum, a widow and
the Town of Farmington Electric Utility System and the
Mountain States Telephone & Telegraph Company, dated May 23,
1962, recorded October 12, 1962 in Book 531, Page 210 of the
San Juan County Records.
64. Right of Way Easement from Mamie Mangum, a widow to Southern
Union Gas Company, dated August 13, 1963, recorded September
18, 1963 in Book 561, Page 181 of the San Juan County Records.
65. Right of Way Easement from Mamie Mangum, a widow to Southern
Union Gas Company, dated August 13, 1963, recorded September
18, 1963 in Book 561, Page 182 of the San Juan County Records.
66. Contract Compensating Landowner for Government use of reserved
right of way between the United States of America and Mamie
Mangum, a widow and Donald L. Mangum and Myrna Mangum, aka
Myrna J. Mangum, his wife, dated December 8, 1965, recorded
July 11, 1966 in Book 633, Page 243 of the San Juan County
Records.
67. Partial Assignment of right of way from Southern Union Gas
Company, a Delaware Corporation to Southern Union Production
Company, a Delaware Corporation, dated December 5, 1975,
recorded January 15, 1976 in Book 759, Page 421 assigning
right of way recorded in Book 91, Page 69 all of the San Juan
County Records.
68. Any loss or damage by virtue of Hammon Canal not being within
its designated right of way.
69. Right of Way from Plateau, Inc., to Union Texas Petroleum
Corporation dated March 2, 1983, recorded April 1, 1983 in
Book 962, Page 170 of the San Juan County Records.
70. Reservations contained in U.S. Patent recorded in Book 1, Page
191 of the San Juan County Records.
71. Assignment and Delegation from Southern Union Company to
Public Service Company of New Mexico dated January 28, 1985,
recorded February 1, 1985 in Book 1012, Page 24 and as amended
by Amended Assignment and Delegation recorded February 17,
1986 in Book 1037, Page 601, all of the San Juan County
Records.
72. Assignment from Thirftway Co., a New Mexico corporation to
Thirftway Pipeline Transportation dated November 15, 1988,
recorded April 10, 1989 in Book 1101, Page 291 of the San Juan
County Records.
73. Right of Way Easement by and between Mrs. Mamie Mangum, widow
and the Basin Light and Power Company and Mountain States
Telephone & Telegraph Company, dated January 28, 1959,
recorded April 14, 1959 in Book 414, Page 34 of the San Juan
County Records.
74. Right of Way Easement by and between Austin A. Davis, a single
person to El Paso Natural Gas Company, a corporation dated
February 9, 1953, recorded February 21, 1953 in Book 202, Page
92 of the San Juan County Records.
75. Title to all of the oil, gas and other minerals and mineral
substances, and all rights, privileges and easements
appurtenant thereto as reserved/conveyed in Mineral Deeds
recorded in Book 465, page 194, Book 465, page 196, Book 465,
page 310 and in Book 515, page 130 and in Warranty Deeds
recorded in Book 467, page 3 and in Book 467, page 4, of the
San Juan County Records.
76. Terms, conditions and provisions of the Oil and Gas Leases
recorded in Book 51, page 39 and in Book 145, page 321 of the
San Juan County Records.
77. Easement to United States of America recorded in Book 93, page
624 of the San Juan County Records.
78. Easement to City of Farmington Electric Utility System and
Mountain States Telephone and Telegraph Company recorded in
Book 1191, page 583 of the San Juan County Records.
79. Right-of-way for Hammond Canal and Sullivan Road as presently
in existence across subject property.
80. Title to all of the oil, gas and other minerals and mineral
substances, and all rights, privileges and easements
appurtenant thereto as reserved/conveyed in Mineral Deeds
recorded in Book 457, page 82 and in Book 473, page 98 of the
San Juan County Records.
81. Terms, conditions and provisions of the Oil and Gas Leases
recorded in Book 99, page 370 of the San Juan County Records.
82. Easement to Kutz Canyon Water Users Association recorded in
Book 118, page 288 of the San Juan County Records.
83. Easement to San Juan County recorded in Book 107, page 80, in
Book 107, page 82 and in Book 107, page 83 of the San Juan
County Records.
84. Title to all of the oil, gas and other minerals and mineral
substances, and all rights, privileges and easements
appurtenant thereto as reserved/conveyed in Warranty Deed
recorded in Book 474, page 257, of the San Juan County
Records.
85. Any adverse claim based upon the assertion that some portion
of subject property has been brought within the boundaries
thereof by an avulsive movement of the San Juan River, or has
been formed by accretion to any such portion.
86. Deviation of fences from the West and South property lines as
revealed and depicted by that certain Retracement Survey
prepared for Bloomfield Refinery by San Juan Engineers dated
July 18, 1991.
Buyer has received copies of the foregoing and a Retracement Survey
for Bloomfield Refinery, prepared by San Juan Engineers, dated July
18, 1991 (the "Survey"). The terms and provisions of the easements
described above are acceptable to Buyer, but the Survey does not
set forth all such easements (the easements not set forth on the
Survey shall be referred to as the "Excepted Easements"). Buyer
shall have until August 31, 1995, to determine the location of the
Excepted Easements on the Refinery Site. Buyer shall notify
Sellers in writing on or before such date if Buyer believes that
the location of the Excepted Easements would interfere materially
with the operation or use of the Refinery as it is now operated or
used and as it has been operated or used on a historical basis, or
result in a Material Effect. If Buyer has given such a notice and
the location of the Excepted Easements does, in fact, interfere
materially with the operation or use of the Refinery as it is now
operated or used and it has been operated or used on a historical
basis or result in a Material Effect, notwithstanding anything
contained in this Agreement to the contrary, this Agreement shall
terminate and neither Buyer nor Sellers shall have any further
duties, obligations or liabilities to each other. If Buyer
notifies Sellers on or before August 31, 1995, that Buyer believes
that location of the Excepted Easements does not interfere with the
operation or use of the Refinery as it is now operated or used and
as it has been operated or used on a historical basis or result in
a Material Effect, or if Buyer does not notify Sellers by such
date, this Agreement shall continue and be in full force and effect
in accordance with its terms and the Excluded Easements will be
deemed to not interfere with the operation or use of the Refinery
as it is now operated or used and it has been operated or used on a
historical basis, and the Excepted Easements shall be Refinery Site
Encumbrances all in accordance with this Agreement.
SCHEDULE 2.04
ALLOCATION OF PURCHASE PRICE
Refinery units & facilities $53,750,000
Buildings and contents 850,000
Autos 100,000
Remote lact units 150,000
San Juan pipeline assets 150,000
$55,000,000
SCHEDULE 3.01(E)
CONTESTED TAXES
NONE
SCHEDULE 3.01(g)
LITIGATION
NONE
SCHEDULE 3.01(J)
CAPITAL PROJECTS
PROJECT IN WORK
ADDITIONAL STORAGE TANKS. This project involves the movement
of two 55,000 barrel, internal floating roof, storage tanks
from Fruita, Colorado to the Refinery. The tanks have been
dismantled and moved to the Refinery and the first tank is
currently being constructed. The foundation construction is
also in progress. Much of the piping materials have been
received and construction is starting by use of a contract
welder. These tanks are being built as additional naphtha and
gasoline storage for periods of reduced crude availability.
One of the tanks will eventually replace existing bolted
naphtha tanks and the other would be used as an Isomerate
storage tank if the unit was constructed.
Total Estimated Costs: $850,000
Estimated Costs Remaining To Be Paid: $660,000
PROJECTS TO BE DONE
1. REFORMER FIREPROOFING. Ongoing projects to repair refinery
fireproofing.
Total Estimated Costs: $41,850
Estimated Costs Remaining To Be Paid: $41,850
2. FIREFIGHTING FOR TANK 31. Improvement to the firefighting for
tank 31 (crude storage).
Total Estimated Costs: $25,000
Estimated Costs Remaining To Be Paid: $25,000
3. TANK FARM STAIRWAYS. Add stairways in the tank farm to allow
safer access into the tank dikes.
Total Estimated Costs: $15,000
Estimated Costs Remaining To Be Paid: $15,000
4. BLENDING. Change to blending premium gasoline instead of
reformate to make the higher octane products.
Total Estimated Costs: $25,000
Estimated Costs Remaining To Be Paid: $25,000
5. CONVERTING TO ELECTRIC BLEND METERS. Convert bay III of the
loading rack to electronic blend meters.
Total Estimated Costs: $50,000
Estimated Costs Remaining To Be Paid: $50,000
SCHEDULE 3.01(K)
COLLECTIVE BARGAINING AGREEMENTS
Collective Bargaining Agreement, dated effective June 1,
1993, between Bloomfield Refining Company and its refinery
employees represented by the Oil, Chemical and Atomic Workers
International Union, AFL-CIO and its Local Union 2-972.
SCHEDULE 3.01(L)
WATER AND WATER RIGHTS
BRC uses approximately 417 acre feet of water per year in its
refining operations. Of such amount, 340 acre feet per year have
been purchased from the Bureau of Reclamation (the "BUREAU") out of
the Navajo Reservoir and 77.838 acre feet are owned by BRC.
A. PURCHASED RIGHTS.
Prior to 1990, BRC regularly obtained one year water service
contacts from the Bureau. Since 1990, however, the Bureau has been
required by the Endangered Species Act to consult with the Fish and
Wildlife Service ("FWS") prior to entering into each new water
service contract with BRC (and other water users). As a result,
BRC has had only one water contract since April of 1990. The term
of the last water contract ran from October 21, 1992 through
October 20, 1993.
The Bureau and the FWS have been conducting an informal
consultation for close to a year in connection with BRC's proposed
water contract. In late 1994, the FWS notified the Bureau that FWS
would require formal consultation because of the likely effect of
BRC's water contract on the critical habitat of the Colorado
squawfish and the razorback sucker, which have been listed by the
EPA as endangered. The Bureau has prepared a biological assessment
of the effects of the proposed contract on the endangered species,
and has concluded that there will be no adverse effects on the
various species or their designated critical habitat. The
biological assessment prepared by the Bureau reviewed and analyzed
all relevant data from water quality testing which was done in the
area surrounding the Refinery, and found no indications of
pollutants emanating from the Refinery. This biological assessment
has been sent to the FWS for its use in preparing its official
biological opinion. FWS has a statutory time period of 90 days
(which may be extended for an additional 60 days) within which to
complete the formal consultation. FWS must deliver its biological
opinion within 45 days after formal consultation has been
completed.
Although not assured, it is likely that the final biological
opinion of the FWS will be similar to the biological opinion
prepared by FWS for the 1992 water service contract, and will
result in a "no jeopardy" finding. A "no jeopardy" finding would
permit the Bureau to enter into a water service contract with BRC.
B. OWNED RIGHTS.
BRC owns the following water rights to 77.838 acre feet of
water from the San Juan River:
NM STATE ENGINEER CONTRACT DESCRIPTION ACRE FT/YR
FILE NO.
2593-2 Water Rights Ownership 24.850
2593-2A Water Rights Ownership 10.000
2593-2B Water Rights Ownership 32.820
2593-2C Water Rights Ownership 10.168
SCHEDULE 3.01(M)
FINANCIAL STATEMENTS
INDEX
1. Bloomfield Refining Company -- Financial Statements, together
with Report of Independent Public Accountants, as of December
31, 1991 and 1990.
2. Bloomfield Refining Company -- Financial Statements, together
with Report of Independent Public Accountant, as of December
31, 1992 and 1991.
3. Bloomfield Refining Company -- Financial Statements, together
with Report of Independent Public Accountant, as of December
31, 1993 and 1992.
4. Bloomfield Refining Company -- Financial Statements, together
with Report of Independent Public Accountant, as of December
31, 1994 and 1993.
5. Bloomfield Refining Company -- Interim Financial Statements, as
of March 31, 1995 (unaudited).
6. Bloomfield Refining Company -- Operating Results for April,
1995.
7. Bloomfield Refining Company -- Operating Results for May, 1995.
ARTHUR
ANDERSEN
ARTHUR ANDERSEN & CO. SC
BLOOMFIELD REFINING COMPANY
FINANCIAL STATEMENTS
TOGETHER WITH REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
AS OF DECEMBER 31, 1991, AND 1990
_____________________
Arthur Andersen & Co.
_____________________
717-17th Street
Denver CO 80202
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder of Bloomfield Refining Company:
We have audited the accompanying balance sheets of Bloomfield
Refining Company (a Delaware corporation), as of December 31, 1991
and 1990, and the related statements of income, retained earnings
and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
Bloomfield Refining Company as of December 31, 1991 and 1990, and
the results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN & CO.
Denver, Colorado,
March 30, 1992.
BLOOMFIELD REFINING COMPANY
BALANCE SHEETS
DECEMBER 31, 1991 AND DECEMBER 31, 1990
ASSETS
CURRENT ASSETS 1991 1990
----------- -----------
Cash and temporary investments $ 6,769,190 $ 6,980,463
Accounts receivable - affiliates 4,405,176 9,936,051
Accounts receivable 277,136 39,943
Inventories 7,899,175 9,609,612
Prepaid expenses and other 2,408,952 573,975
----------- -----------
Total current assets 21,759,629 27,140,044
----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Refinery property, plant and equipment 12,127,034 11,113,501
Gas plants, property and equipment 3,932,621 ---
Less: Accumulated depreciation (2,555,378) (1,622,876)
----------- -----------
13,504,277 9,490,625
Construction in progress 523,427 198,068
----------- -----------
Total property, plant and equipment 14,027,704 9,688,693
----------- -----------
Prepaid expenses and other 399,146 11,585
----------- -----------
TOTAL ASSETS $36,186,479 $36,840,322
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES 1991 1990
----------- -----------
Accounts payable - affiliates $ 9,180,281 $12,199,594
Accounts payable 487,414 661,459
Current portion of long-term debt 4,450,000 ---
Income taxes payable - affiliate 1,191,500 155,240
Accrued liabilities 875,788 690,281
Accrued turnaround costs --- 660,986
----------- -----------
Total current liabilities 16,184,983 14,367,560
----------- -----------
NON-CURRENT LIABILITIES
Long-term debt, excluding current portion 3,693,763 ---
Accrued turnaround costs 1,418,741 801,110
Other 83,260 16,302
----------- -----------
Total non-current liabilities 5,195,764 817,412
----------- -----------
Deferred income taxes 238,000 238,000
Commitments and contingencies (Note 9)
SHAREHOLDER'S EQUITY
Common stock, .01 par value: 1,000
voting shares authorized, issued and
outstanding 10 10
Contributed capital 3,200,090 3,200,090
Retained earnings 11,367,632 18,217,250
----------- -----------
Total shareholder's equity 14,567,732 21,417,350
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $36,186,479 $36,840,322
=========== ===========
The accompanying notes to financial statements are an integral part of
these balance sheets.
BLOOMFIELD REFINING COMPANY
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1991 AND 1990
1991 1990
------------ ------------
Operating revenues $134,027,081 $156,400,077
Operating expenses 124,267,090 141,760,077
------------ ------------
Gross margin 9,759,991 14,640,000
General and administrative expenses 6,310,348 3,958,008
------------ ------------
Operating income 3,449,643 10,681,992
------------ ------------
OTHER INCOME (EXPENSE)
Interest income 120,508 ---
Interest expense (415,401) (5)
Other 89,632 16,632
------------ ------------
(205,261) 16,627
------------ ------------
Income before income taxes 3,244,382 10,698,619
INCOME TAX (EXPENSE) BENEFIT (NOTE 4)
Current (1,094,000) (57,740)
Deferred --- 115,000
------------ ------------
(1,094,000) 57,260
------------ ------------
NET INCOME $ 2,150,382 $ 10,755,879
============ ============
STATEMENTS OF RETAINED EARNINGS
Balance at January 1 $ 18,217,250 $ 12,461,371
Net income 2,150,382 10,755,879
Dividends (9,000,000) (5,000,000)
------------ ------------
BALANCE AT DECEMBER 31 $ 11,367,632 $ 18,217,250
============ ============
The accompanying notes to financial statements are an integral part of these
statements.
BLOOMFIELD REFINING COMPANY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1991 AND 1990
1991 1990
------------- -------------
Cash flows from operating activities:
Cash received from customers $ 139,358,483 $ 154,264,371
Cash paid to suppliers and employees (132,338,157) (142,755,496)
Cash outlay for turnaround (844,354) (156,024)
Interest received 113,933 ---
Interest paid (363,237) (5)
Income taxes 81,163 ---
Deposit 5,689 (5,689)
Other (34,370) 46,117
------------- -------------
Net cash provided by operating activities 5,979,150 11,393,274
------------- -------------
Cash flows used by investing activities:
Capital expenditures - refinery (1,386,071) (757,222)
Acquisition of gas plants (3,792,060) ---
Capital expenditures - gas plants (156,055) ---
------------- -------------
Net cash used by investing activities (5,334,186) (757,222)
------------- -------------
Cash flows used by financing activities:
Borrowings under term loan agreement 8,500,000 ---
Proceeds received from acquisition of gas plant note 775,218 ---
Principal payments on debt (1,131,455) ---
Dividends distributed (9,000,000) (5,000,000)
------------- -------------
Net cash used by financing activities (856,237) (5,000,000)
------------- -------------
Net (decrease) increase in cash and temporary investments (211,273) 5,636,052
Cash and temporary investments at beginning of year 6,980,463 1,344,411
------------- -------------
Cash and temporary investments at end of year $ 6,769,190 $ 6,980,463
============= =============
The accompanying notes to financial statements are an integral part of these
statements.
BLOOMFIELD REFINING COMPANY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1991 AND 1990
1991 1990
----------- -----------
Reconciliation of net income to net cash provided
by operating activities:
Net income $ 2,150,382 $10,755,879
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 932,502 602,035
Accrued turnaround costs 800,999 970,872
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 5,309,176 (1,772,673)
Decrease (increase) in inventories 1,710,437 (1,406,551)
Increase in prepaid expenses and other (2,222,538) (225,244)
Decrease in other assets --- 665
(Decrease) increase in accounts payable (3,146,179) 2,633,853
Increase in income taxes payable - affiliate 1,036,260 57,740
Increase in accrued liabilities 185,507 47,722
Decrease in accrued turnaround costs (844,354) (156,024)
Increase in other liabilities 66,958 ---
Decrease in deferred income taxes --- (115,000)
----------- -----------
Net cash provided by operating activities $ 5,979,150 $11,393,274
=========== ===========
The accompanying notes to financial statements are an integral part of these
statements.
BLOOMFIELD REFINING COMPANY
NOTES TO FINANCIAL STATEMENTS
(1) BACKGROUND AND ORGANIZATION
---------------------------
On August 31, 1984, Bloomfield Refining Company, a Delaware
corporation (the Company), was incorporated. The Company's primary
activities are the refining of petroleum products and gas plant
operations. The Company is a wholly-owned subsidiary of Gary-Williams
Energy Corporation (GWEC) and operates a refinery in Bloomfield, New
Mexico with a throughput capacity of 17,000 barrels per day. Effective
July 1, 1991, the Company purchased certain ownership interests in two
gas plants located in Utah and the net assets of a gas plant located in
Colorado from GWEC.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
--------------------------------------------
CASH AND TEMPORARY INVESTMENTS
- ------------------------------
For purposes of these statements, the Company considers
investments purchased with an original maturity of three months or less
to be cash or temporary investments.
INVENTORIES
- -----------
Inventories are valued at the lower of first-in, first-out cost or
market. Inventories at December 31, 1991 and 1990 are as follows:
1991 1990
---------- ----------
Refined, unrefined and intermediate products $5,412,447 $6,861,818
Crude oil 1,411,844 1,765,125
Materials and supplies 1,074,884 982,669
---------- ----------
$7,899,175 $9,609,612
========== ==========
PROPERTY, PLANT AND EQUIPMENT
- -----------------------------
The initial purchase and additions to property, plant and
equipment are recorded at cost. Depreciation is provided using the
straight-line method based on estimated useful lives ranging from 2 to
35 years.
Ownership interests in gas plants are recorded at cost and
proportionately consolidated for financial statement purposes.
Depreciation is provided using the straight-line method with estimated
useful lives ranging from 5 to 12 years.
GENERAL AND ADMINISTRATIVE EXPENSES
- -----------------------------------
The Company reimburses GWEC and an affiliate for general and
administrative services relating to the supply and marketing of raw
materials and refined products and gas plant operations.
ACCRUED TURNAROUND COSTS
- ------------------------
Major repair and maintenance expenses (turnaround costs) are
accrued and charged to current operations in anticipation of the work
to be performed in future periods to renew the related refinery assets.
Accrued turnaround costs are classified as either current or non-
current liabilities based upon the current scheduling of major
expenditures.
(3) LONG-TERM DEBT
--------------
Long-term debt consists of the following:
Current Long-Term
Total Portion Portion
---------- ---------- ----------
Note payable to a bank (a) $7,437,500 $4,250,000 $3,187,500
Note payable-affiliate (b) 706,263 200,000 506,263
---------- ---------- ----------
December 31, 1991 $8,143,763 $4,450,000 $3,693,763
========== ========== ==========
(a) On September 4, 1991, the Company and GWEC (collectively, the
Borrower) jointly entered into an amended credit agreement whereby the
Company received loan proceeds of $8,500,000. The proceeds of the loan
were used to acquire, from GWEC, the gas plants located in Utah and
Colorado, to pay dividends to GWEC and for general corporate purposes.
On December 6, 1991, the Borrower entered into a new credit agreement
whereby loan proceeds of $7,791,667 were received and used to repay the
outstanding balance on the $8,500,000 bank term loan and whereby a new
revolving credit facility was established. Under terms of the
revolving credit facility, the Borrower may borrow up to $5,000,000 in
cash and/or issue letters of credit which in the aggregate cannot
exceed the lesser of $35,000,000 or the borrowing base. The borrowing
base, which consists principally of accounts receivable, inventory, and
exchange balances was approximately $24,000,000 and $20,000,000 as of
December 31, 1991 and March 30, 1992. The Borrower had no amounts
outstanding under the revolving credit facility, however, had issued
letters of credit totalling approximately $21,000,000 as of December
31, 1991.
The revolving credit facility and term loan bear interest at a
rate based on the bank's prime rate. Alternatively, interest rates can
be fixed for 30,60, or 90 day periods on portions of the term loan at a
floating Eurocurrency rate. At December 31, 1991, the weighted average
rate being paid was approximately 7.50%. The term notes call for
minimum monthly principal payments of $354,167 with the final payment
due in August, 1993. These loans are secured by substantially all of
the assets of the Company and, among other things, require maintenance
of certain financial covenants and ratios. The revolving credit
facility matures November 30, 1992; however, the credit agreement
allows for the Borrower to request extensions of the maturity date.
(b) The note is a 9% interest bearing non-recourse note issued in
connection with the acquisition of a partial ownership interest in a
gas plant. The note is secured by the ownership interest and is
payable over a maximum period of 15 years, ending September 30, 2001.
The monthly installments are determined by the prior month's net cash
flow. The note is payable to an affiliate.
(4) INCOME TAXES
------------
The Company and GWEC are members of a consolidated tax group which
files a consolidated federal income tax return. On January 1, 1991, an
agreement was entered into between the Company and GWEC whereby the
Company determines, on a stand alone basis, the tax liability or
benefit as if it were not a member of the tax group. The Company then
reimburses or is reimbursed by GWEC for its income tax liability or
benefit.
Deferred income taxes are provided as a result of recording income
and expenses, principally depreciation and turnaround expenses, in
different periods for financial and tax accounting purposes.
The Company has adopted the provisions of Statement of Financial
Accounting Standards No. 96, "Accounting for Income Taxes" which was
superseded in February 1992 by Statement of Financial Accounting
Standards No. 109 (SFAS 109), "Accounting for Income Taxes" which
provides for the recognition of deferred tax assets arising from
existing potential future tax benefits. The Company is required to
adopt SFAS 109 in calendar year 1993 and does not anticipate that such
adoption will have a material impact on the Company's financial
position.
(5) OPERATING REVENUES AND EXPENSES BY SEGMENTS
--------------------------------------------
The following segment information reflects operating revenues,
operating expenses and gross margins for the twelve months ended
December 31, 1991 and 1990.
Refining Gas Plants Total
------------ ---------- ------------
December 31, 1991
------------------------------------------
Operating Revenues $131,917,131 $2,109,950 $134,027,081
Operating Expenses 122,884,788 1,382,302 124,267,090
------------ ---------- ------------
Gross Margin $ 9,032,343 $ 727,648 $ 9,759,991
============ ========== ============
December 31, 1990
------------------------------------------
Operating Revenues $156,400,077 $ --- $156,400,077
Operating Expenses 141,760,077 --- 141,760,077
------------ ---------- ------------
Gross Margin $ 14,640,000 $ --- $ 14,640,000
============ ========== ============
(6) RELATED PARTY TRANSACTIONS
--------------------------
Effective July 1, 1991, a supply and marketing service agreement
was entered into between the Company and GWEC, whereas GWEC purchases
crude oil and other raw materials for resale to the Company, at cost,
for processing at the refinery. The intercompany purchase of raw
materials include all amounts legally accrued and owing by GWEC to
third parties, including prepayments and offsite inventory. Also, the
Company sells refined petroleum products to GWEC, at market, for resale
by GWEC. For the supply and marketing services provided by GWEC, the
Company pays a management fee pursuant to the terms of a management
agreement. Prior to July 1, 1991, GWEC sold crude oil and raw
materials to the Company at cost plus $.01 per gallon and purchased
refined products from the Company at market less $.01 per gallon.
(7) EMPLOYEE BENEFIT PLANS
----------------------
The Company has a profit sharing plan (defined contribution plan)
covering certain non-union employees who meet eligibility requirements
as to age and length of service. Contributions to the plan are
determined annually by the Company. Contributions of $162,515 and
$67,050 were accrued for the twelve months ended December 31, 1991 and
1990, respectively.
The Company has a defined benefit pension plan for union
employees. The benefits are based on a percentage of the employee's
final earnings, as defined, and years of credited service, up to a
maximum of 30 years. The Company's funding policy is to contribute
annually an amount to fund normal cost and amortize unfunded actuarial
liabilities over 19 years. Plan assets at December 31, 1991 and 1990
consist primarily of private and public debt and equity investments.
The following table sets forth the funded status and amounts
recognized in the Company's statements of financial position and income
at December 31, 1991 and 1990:
1991 1990
--------- ---------
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $228,124 and $147,652 at
December 31, 1991 and 1990, respectively $(248,606) $(161,342)
========= =========
Projected benefit obligation for service rendered to date (248,606) (161,342)
Plan assets at fair value 165,346 118,846
--------- ---------
Projected benefit obligation in excess of plan assets (83,260) (42,496)
Unrecognized net obligation existing at January 1, 10,920 11,585
Prior service cost not yet recognized 15,811 ---
Unrecognized net loss from past experience different
from that assumed and effects of changes in
assumptions 78,558 27,917
Adjustment to recognize minimum liability (105,289) (39,502)
--------- ---------
Accrued pension liability included in other liabilities $ (83,260) $ (42,496)
========= =========
Net pension cost includes the following components:
Service cost $ 26,500 $ 30,174
Interest cost 14,302 10,568
Actual return on plan assets (14,298) (2,792)
Net amortization and deferral of other components 4,823 (5,342)
--------- ---------
Net periodic pension cost $ 31,327 $ 32,608
========= =========
The discount rate used in determining the actuarial present value
of the projected benefit obligation was 6.75% and 7.499% for 1991 and
1990, respectively. The average rate of increase in future
compensation levels and the expected long-term rate of return on
pension plan assets was 0% and 9.0%, respectively in both years.
(8) MAJOR CUSTOMERS
---------------
During the years ended December 31, 1991 and 1990, the Company
sold 100% of the refined products to GWEC. Also, during that period,
the Company purchased 100% of the crude oil and raw materials from
GWEC.
(9) COMMITMENTS AND CONTINGENCIES
-----------------------------
The Company paid (received) a retainer fee to (from) a third party
based on 5% of the net income (loss) before taxes. This fee is
included in general and administrative expenses and was $(22,207) and
$550,300 for the years ended December 31, 1991 and 1990, respectively.
Effective February 1, 1991, this agreement was terminated and new
agreements were entered into between GWEC and affiliates of the third
party providing for payment of consulting fees of $50,000 per month
until January 31, 1992 and $15,000 per calendar quarter from 1992 to
2001. In addition, a retainer fee of $1,000,000, plus interest, is
payable for services to be provided in 1992 and 1993.
The Company is subject to various environmental and other
regulations primarily administered by the United States Environmental
Protection Agency, the New Mexico Health and Environmental Department
and the New Mexico Environmental Improvement Division. Management of
the Company believes it has complied with all aspects associated with
these regulations.
A Company affiliate entered into a ten year lease agreement for
office space in November 1989. The Company has guaranteed the
performance of the affiliate's obligations. Terms of the lease provide
for annual rentals of $396,000 in the second year and escalating to
$796,000 in years six through ten. In addition to the rent, the
Company has guaranteed the annual payment of $276,000 in occupancy
costs with provisions for escalation based on actual expenses. The
total estimated costs for rentals and operating expenses for 1992
amounts to $735,000.
ARTHUR
ANDERSEN
ARTHUR ANDERSEN & CO. SC
BLOOMFIELD REFINING COMPANY
FINANCIAL STATEMENTS
TOGETHER WITH REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
AS OF DECEMBER 31, 1992 AND 1991
ARTHUR ANDERSEN & CO.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder of Bloomfield Refining Company:
We have audited the accompanying balance sheets of Bloomfield
Refining Company (a Delaware corporation), as of December 31, 1992
and 1991, and the related statements of income, retained earnings
and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
Bloomfield Refining Company as of December 31, 1992 and 1991, and
the results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN & CO.
Denver, Colorado,
March 30, 1993.
BLOOMFIELD REFINING COMPANY
BALANCE SHEETS
DECEMBER 31, 1992 AND 1991
ASSETS
CURRENT ASSETS 1992 1991
----------- -----------
Cash and temporary investments $ 7,291,275 $ 6,769,190
Accounts receivable - affiliates 5,486,216 4,405,176
Accounts receivable 57,241 277,136
Inventories 7,861,852 7,899,175
Prepaid expenses - crude oil 432,432 1,431,245
Prepaid expenses and other 1,556,214 977,707
----------- -----------
Total current assets 22,685,230 21,759,629
----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Refinery property, plant and equipment 12,517,487 12,127,034
Gas plants, property and equipment 4,584,015 3,932,621
Less: Accumulated depreciation (3,641,734) (2,555,378)
----------- -----------
13,459,768 13,504,277
Construction in progress 950,020 523,427
----------- -----------
Total property, plant and equipment 14,409,788 14,027,704
----------- -----------
Prepaid expenses and other 25,206 399,146
----------- -----------
TOTAL ASSETS $37,120,224 $36,186,479
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES 1992 1991
----------- -----------
Accounts payable - affiliates $ 9,319,171 $ 9,180,281
Accounts payable 429,096 487,414
Current portion of long-term debt 2,767,496 4,450,000
Accrued liabilities 1,201,860 875,788
Accrued turnaround costs 2,604,232 ---
Income taxes payable - affiliate 1,122,000 1,191,500
----------- -----------
Total current liabilities 17,443,855 16,184,983
----------- -----------
NON-CURRENT LIABILITIES
Long-term debt, excluding current portion --- 3,693,763
Accrued turnaround costs --- 1,418,741
Other 160,692 83,260
----------- -----------
Total non-current liabilities 160,692 5,195,764
----------- -----------
Deferred income taxes 238,000 238,000
Commitments and contingencies (Note 9)
SHAREHOLDER'S EQUITY
Common stock, .01 par value: 1,000
voting shares authorized, issued and
outstanding 10 10
Contributed capital 3,200,090 3,200,090
Retained earnings 16,077,577 11,367,632
----------- -----------
Total shareholder's equity 19,277,677 14,567,732
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $37,120,224 $36,186,479
=========== ===========
The accompanying notes to financial statements are an integral part of
these balance sheets.
BLOOMFIELD REFINING COMPANY
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1991
1992 1991
------------ ------------
Operating revenues $143,974,427 $134,027,081
Operating expenses 124,573,250 124,190,901
------------ ------------
Gross margin 19,401,177 9,836,180
General and administrative expenses 8,542,979 6,386,537
------------ ------------
Operating income 10,858,198 3,449,643
------------ ------------
OTHER INCOME (EXPENSE)
Gain on sale of gas plant assets (Note 1) 1,495,553 ---
Interest income 272,471 120,508
Interest expense (753,046) (415,401)
Other 89,671 89,632
------------ ------------
1,104,649 (205,261)
------------ ------------
Income before income taxes 11,962,847 3,244,382
INCOME TAX EXPENSE (NOTE 4)
Current (4,993,000) (1,094,000)
Deferred --- ---
------------ ------------
(4,993,000) (1,094,000)
------------ ------------
NET INCOME $ 6,969,847 $ 2,150,382
============ ============
STATEMENTS OF RETAINED EARNINGS
Balance at January 1 $ 11,367,632 $ 18,217,250
Net income 6,969,847 2,150,382
Dividends (2,230,572) (9,000,000)
Excess of additional pension liability
over unrecognized prior service cost (29,330) ---
------------ ------------
BALANCE AT DECEMBER 31 $ 16,077,577 $ 11,367,632
============ ============
The accompanying notes to financial statements are an integral part of these
statements.
BLOOMFIELD REFINING COMPANY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1991
1992 1991
------------- -------------
Cash flows from operating activities:
Cash received from customers $ 143,704,941 $ 139,358,483
Cash paid to suppliers and employees (130,035,607) (132,338,157)
Cash outlay for turnaround (3,522) (844,354)
Interest received 264,519 113,933
Interest paid (806,318) (363,237)
Income taxes (5,062,500) 81,163
Deposits --- 5,689
Other 135,602 (34,370)
------------- -------------
Net cash provided by operating activities 8,197,115 5,979,150
------------- -------------
Cash flows from investing activities:
Capital expenditures - refinery (743,730) (1,386,071)
Acquisition of gas plant interests (Note 1) (2,544,653) (3,792,060)
Capital expenditures - gas plants (88,426) (156,055)
Proceeds from sale of gas plant assets 3,308,618 ---
------------- -------------
Net cash used in investing activities (68,191) (5,334,186)
------------- -------------
Cash flows from financing activities:
Borrowings under term loan agreement --- 8,500,000
Proceeds received from acquisition of gas plant note --- 775,218
Principal payments on debt (5,376,267) (1,131,455)
Dividends distributed (2,230,572) (9,000,000)
------------- -------------
Net cash used in financing activities (7,606,839) (856,237)
------------- -------------
Net increase (decrease) in cash and temporary investments 522,085 (211,273)
Cash and temporary investments at beginning of year 6,769,190 6,980,463
------------- -------------
Cash and temporary investments at end of year $ 7,291,275 $ 6,769,190
============= =============
The accompanying notes to financial statements are an integral part of these
statements.
BLOOMFIELD REFINING COMPANY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1991
1992 1991
----------- -----------
Reconciliation of net income to net cash provided
by operating activities:
Net income $ 6,969,847 $ 2,150,382
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of assets (1,495,553) ---
Depreciation 1,288,601 932,502
Accrued turnaround costs 883,716 800,999
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (873,550) 5,309,176
Decrease in inventories 37,323 1,710,437
Decrease (increase) in prepaid expenses and other 461,337 (2,222,538)
Decrease in other assets 387,561 ---
Decrease in accounts payable (13,964) (3,146,179)
(Decrease) increase in income taxes payable - affiliate (69,500) 1,036,260
Increase in accrued liabilities 242,090 185,507
Increase (decrease) in accrued turnaround costs 301,775 (844,354)
Increase in other liabilities 77,432 66,958
----------- -----------
Net cash provided by operating activities $ 8,197,115 $ 5,979,150
=========== ===========
The accompanying notes to financial statements are an integral part of these
statements.
BLOOMFIELD REFINING COMPANY
NOTES TO FINANCIAL STATEMENTS
(1) BACKGROUND AND ORGANIZATION
---------------------------
Organization
- ------------
On August 31, 1984, Bloomfield Refining Company, a Delaware
corporation (the Company), was incorporated. The Company's primary
activities are the refining of petroleum products and gas plant
operations. The Company is a wholly-owned subsidiary of Gary-Williams
Energy Corporation (GWEC) and operates a refinery in Bloomfield, New
Mexico with a throughput capacity of 17,000 barrels per day. Effective
July 1, 1991, the Company purchased certain ownership interests in two
gas plants located in Utah and the net assets of a gas plant located in
Colorado from GWEC.
Gas Plants
- ----------
On August 7, 1992, the Company purchased an additional twenty-six
percent (26%) undivided interest in a gas plant GWEC operates in Uintah
and Duchesne Counties, Utah for cash and a promissory note, paid in
full in September, 1992. Net ownership income of $455,750, including
interest expense, from the effective date of the purchase, March 1,
1992, through July 31, 1992 relating to the increased ownership
interest was offset against the gross purchase price of $2,550,000.
On December 8, 1992, the Company increased its ownership interest
in the same gas plant GWEC operates in Uintah and Duchesne Counties,
Utah to forty-five percent (45%) by purchasing another ten percent
(10%) undivided interest from a third party. Net ownership income of
$134,508 from the effective date of the purchase, September 1, 1992,
through November 30, 1992 relating to the increased ownership interest
was offset against the gross purchase price of $612,168.
During 1992, the Company sold all rights, title and interest in a
gas plant gathering system, an extraction plant, and certain related
equipment and appurtenances located in Colorado to third parties for
$3,296,943, resulting in a gain on sale of gas plant assets of
$1,495,553.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
--------------------------------------------
Cash and Temporary Investments
- ------------------------------
For purposes of these statements, the Company considers
investments purchased with an original maturity of three months or less
to be cash or temporary investments.
Inventories
- -----------
Inventories are valued at the lower of first-in, first-out cost or
market. Inventories at December 31, 1992 and December 31, 1991 are as
follows:
December 31, December 31,
1992 1991
----------- -----------
Refined, unrefined and intermediate products $5,361,150 $5,412,447
Crude oil 1,580,418 1,411,844
Materials and supplies 920,284 1,074,884
---------- ----------
$7,861,852 $7,899,175
========== ==========
Property, Plant and Equipment
- -----------------------------
The initial purchase and additions to property, plant and
equipment are recorded at cost. Depreciation is provided using the
straight-line method based on estimated useful lives ranging from 2 to
35 years.
Ownership interests in gas plants are recorded at cost and
proportionately consolidated for financial statement purposes.
Depreciation is provided using the straight-line method with estimated
useful lives ranging from 5 to 10 years.
General and Administrative Expenses
- -----------------------------------
The Company reimburses GWEC and an affiliate for general and
administrative services relating to the supply and marketing of raw
materials and refined products and gas plant operations.
Accrued Turnaround Costs
- ------------------------
Major repair and maintenance expenses (turnaround costs) are
accrued and charged to current operations in anticipation of the work
to be performed in future periods to renew the related refinery assets.
Accrued turnaround costs are classified as either current or non-
current liabilities based upon the scheduling of major expenditures.
Reclassifications
- -----------------
Certain prior year amounts have been reclassified for consistency with
the current year presentation.
(3) LONG-TERM DEBT
--------------
Long-term debt consists of the following:
Current Long-Term
Total Portion Portion
---------- ---------- ----------
Note payable to a bank (a) $2,767,496 $2,767,496 $ ---
---------- ---------- ----------
December 31, 1992 $2,767,496 $2,767,496 $ ---
========== ========== ==========
Note payable to a bank (a) $7,437,500 $4,250,000 $3,187,500
Note payable-affiliate (b) 706,263 200,000 506,263
---------- ---------- ----------
December 31, 1991 $8,143,763 $4,450,000 $3,693,763
========== ========== ==========
(a) The Company has a revolving credit facility with a bank under
which it may borrow up to $5,000,000 in cash and/or issue letters of
credit which in the aggregate cannot exceed the lesser of $35,000,000
or the borrowing base. The borrowing base, which consists principally
of accounts receivable, inventory, and exchange balances was
approximately $22,000,000 and $24,000,000 as of December 31, 1992 and
1991. The Company had no amounts outstanding under the revolving
credit facility, however, letters of credit totalling approximately
$18,000,000 and $21,000,000 had been issued as of December 31, 1992 and
1991.
The revolving credit facility and term loan bear interest at a
rate based on the bank's prime rate. Alternatively, interest rates can
be fixed for 30, 60, or 90 day periods on portions of the term loan at
a floating Eurocurrency rate. At December 31, 1992 and 1991, the
weighted average rate being paid was approximately 6.50% and 7.50%,
respectively. The term notes call for minimum monthly principal
payments of $354,167 with the final payment due in August, 1993. These
loans are secured by substantially all of the assets of the Company
and, among other things, require maintenance of certain financial
covenants and ratios. The revolving credit facility matures August 31,
1993; however, the credit agreement provides for extensions of the
maturity date.
On October 15, 1992, the credit agreement was amended to allow the
Company to draw up to $7,000,000 by December 31, 1993, for capital
projects (see Note 9) at the Bloomfield refinery at an interest rate of
2% over prime. This loan will be amortized monthly over two years
beginning the earlier of January, 1994, or the month following
completion of the projects at which time the interest rate is reduced
to 1.50% over prime. No amounts had been drawn on this note as of
December 31, 1992 and as of March 30, 1993, $1,700,000 has been drawn.
(b) The note was a 9% interest bearing non-recourse note issued in
connection with the acquisition of a partial ownership interest in a
gas plant. The note was secured by the ownership interest and in June,
1992, the note was paid in full.
(4) INCOME TAXES
------------
The Company and GWEC are members of a consolidated tax group which
files a consolidated federal income tax return. On January 1, 1991, an
agreement was entered into between the Company and GWEC whereby the
Company determines, on a stand alone basis, the tax liability or
benefit as if it were not a member of the tax group. The Company then
reimburses or is reimbursed by GWEC for its income tax liability or
benefit.
Deferred income taxes are provided as a result of recording income
and expenses, principally depreciation and turnaround expenses, in
different periods for financial and tax accounting purposes.
The Company has adopted the provisions of Statement of Financial
Accounting Standards No. 96, "Accounting for Income Taxes" which was
superseded in February 1992 by Statement of Financial Accounting
Standards No. 109 (SFAS 109), "Accounting for Income Taxes" which
provides for the recognition of deferred tax assets arising from
existing potential future tax benefits. The Company is required to
adopt SFAS 109 in calendar year 1993 and does not anticipate that such
adoption will have a material impact on the Company's financial
position.
(5) OPERATING REVENUES AND EXPENSES BY SEGMENTS
--------------------------------------------
The following segment information reflects operating revenues,
operating expenses and gross margins for the years ended December 31,
1992 and 1991.
Refining Gas Plants Total
------------ ---------- ------------
December 31, 1992
------------------------------------------
Operating Revenues $140,088,307 $3,886,120 $143,974,427
Operating Expenses 122,005,814 2,567,436 124,573,250
------------ ---------- ------------
Gross Margin $ 18,082,493 $1,318,684 $ 19,401,177
============ ========== ============
December 31, 1991
------------------------------------------
Operating Revenues $131,917,131 $2,109,950 $134,027,081
Operating Expenses 122,808,599 1,382,302 124,190,901
------------ ---------- ------------
Gross Margin $ 9,108,532 $ 727,648 $ 9,836,180
============ ========== ============
(6) RELATED PARTY TRANSACTIONS
--------------------------
Effective July 1, 1991, a supply and marketing service agreement
was entered into between the Company and GWEC, whereas GWEC purchases
crude oil and other raw materials for resale to the Company, at cost,
for processing at the refinery. The intercompany purchase of raw
materials include all amounts legally accrued and owing by GWEC to
third parties, including prepayments and offsite inventory. Also, the
Company sells refined petroleum products to GWEC, at market, for resale
by GWEC. For the supply and marketing services provided by GWEC, the
Company pays a management fee pursuant to the terms of a management
agreement. Prior to July 1, 1991, GWEC sold crude oil and raw
materials to the Company at cost plus $.01 per gallon and purchased
refined products from the Company at market less $.01 per gallon.
On December 1, 1992, the Company guaranteed the payment by GWEC of
an aggregate maximum at any one time of $2,000,000 of present and/or
future indebtedness owed to a third party crude supplier.
(7) EMPLOYEE BENEFIT PLANS
----------------------
The Company has a profit sharing plan (defined contribution plan)
covering certain non-union employees who meet eligibility requirements
as to age and length of service. Contributions to the plan are
determined annually by the Company. Contributions of $169,002 and
$162,515 were accrued for the years ended December 31, 1992 and
December 31, 1991, respectively.
The Company has a defined benefit pension plan for union
employees. The benefits are based on a percentage of the employee's
final earnings, as defined, and years of credited service, up to a
maximum of 30 years. The Company's funding policy is to contribute
annually an amount to fund normal cost and amortize unfunded actuarial
liabilities over 19 years. Plan assets at December 31, 1992 and 1991
consist primarily of private and public debt and equity investments.
The following table sets forth the funded status and amounts
recognized in the Company's statements of financial position and
operations at December 31, 1992 and 1991:
1992 1991
--------- ---------
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $364,702 and $228,124 at
December 31, 1992 and 1991, respectively $(377,359) $(248,606)
========= =========
Projected benefit obligation for service rendered to date (377,359) (248,606)
Plan assets at fair value 216,667 165,346
--------- ---------
Projected benefit obligation in excess of plan assets (160,692) (83,260)
Unrecognized net obligation existing at January 1, 10,255 10,920
Prior service cost not yet recognized 14,951 15,811
Unrecognized net loss from past experience different from
that assumed and effects of changes in assumptions 176,517 78,558
Adjustment to recognize minimum liability (201,723) (105,289)
--------- ---------
Accrued pension liability included in other liabilities $(160,692) $ (83,260)
========= =========
Net pension cost includes the following components:
Service cost $ 35,988 $ 26,500
Interest cost 18,060 14,302
Actual return on plan assets (18,597) (14,298)
Net amortization and deferral of other components 6,712 4,823
--------- ---------
Net periodic pension cost $ 42,163 $ 31,327
========= =========
The discount rate used in determining the actuarial present value
of the projected benefit obligation was 5.75% and 6.75% for 1992 and
1991, respectively. The average rate of increase in future
compensation levels was 0% and the expected long-term rate of return on
pension plan assets was 9.0% in both years.
(8) MAJOR CUSTOMERS
---------------
During the years ended December 31, 1992 and 1991, the Company
sold 100% of the refined products to GWEC. Also, during that period,
the Company purchased 100% of the crude oil and raw materials from
GWEC.
(9) COMMITMENTS AND CONTINGENCIES
-----------------------------
The Company paid (received) a retainer fee to (from) a third party
based on 5% of the net income (loss) before taxes. This fee is
included in general and administrative expenses. Effective February 1,
1991, this agreement was terminated and new agreements were entered
into between GWEC and affiliates of the third party providing for
payment of consulting fees of $15,000 per calendar quarter from 1992 to
2001. In addition, a retainer fee of $1,000,000 was paid by GWEC and
reimbursed by the Company for services to be provided in 1992 and 1993
and is being amortized on a straight-line basis.
The Company is subject to various environmental and other
regulations primarily administered by the United States Environmental
Protection Agency, the New Mexico Health and Environmental Department
and the New Mexico Environmental Improvement Division. Management of
the Company believes it has complied with all aspects associated with
these regulations. In December, 1992 the Company entered into an
administrative order with the Environmental Protection Agency to
perform certain environmental work. An environmental liability reserve
in the amount of $362,000 was accrued in 1992 for work to be performed
in 1993 to assess the nature of any environmental cleanup requirements
at the refinery.
A Company affiliate entered into a ten year lease agreement for
office space in November 1989. The Company has guaranteed the
performance of the affiliate's obligations. Terms of the lease provide
for annual rentals of $396,000 in the second year and escalating to
$796,000 in years six through ten. In addition to the rent, the
Company has guaranteed the annual payment of $276,000 in occupancy
costs with provisions for escalation based on actual expenses. The
total estimated costs for rentals and operating expenses for 1993
amounts to $799,000.
In December, 1992, the Company engaged a contractor to engineer,
fabricate and install a diesel desulfurization unit to be operational
at the refinery in 1993 for a total contract price of $3,646,391
exclusive of any applicable sales and/or use taxes and subject to
adjustment for any changes in the work directive.
ARTHUR
ANDERSEN
ARTHUR ANDERSEN & CO. SC
BLOOMFIELD REFINING COMPANY
FINANCIAL STATEMENTS
TOGETHER WITH REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
AS OF DECEMBER 31, 1993 AND 1992
ARTHUR ANDERSEN & CO.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder of Bloomfield Refining Company:
We have audited the accompanying balance sheets of Bloomfield
Refining Company (a Delaware corporation), as of December 31,
1993 and 1992, and the related statements of operations,
retained earnings and cash flows for the years then ended.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Bloomfield Refining Company as of December 31,
1993 and 1992, and the results of its operations and its cash
flows for the years then ended in conformity with generally
accepted accounting principles.
/s/ ARTHUR ANDERSEN & CO.
Denver, Colorado,
March 25, 1994.
BLOOMFIELD REFINING COMPANY
BALANCE SHEETS
DECEMBER 31, 1993 AND 1992
ASSETS
CURRENT ASSETS 1993 1992
----------- -----------
Cash and temporary investments $ 9,501,500 $ 7,291,275
Accounts receivable - affiliates 5,646,661 5,486,216
Accounts receivable 35,783 57,241
Inventories 6,046,026 7,861,852
Prepaid expenses - crude oil 819,868 432,432
Prepaid expenses and other 879,839 1,556,214
Deferred tax asset 291,500 ---
----------- -----------
Total current assets 23,221,177 22,685,230
----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Refinery property, plant and equipment 22,177,094 12,517,487
Gas plants, property and equipment 4,652,324 4,584,015
Less: Accumulated depreciation (4,854,519) (3,641,734)
----------- -----------
21,974,899 13,459,768
Construction in progress 409,970 950,020
----------- -----------
Total property, plant and equipment 22,384,869 14,409,788
----------- -----------
Other 240,720 25,206
----------- -----------
TOTAL ASSETS $45,846,766 $37,120,224
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES 1993 1992
----------- -----------
Accounts payable - affiliates $ 8,513,020 $ 9,319,171
Accounts payable 935,698 429,096
Current portion of long-term debt 2,875,000 2,767,496
Accrued liabilities 1,260,047 1,201,860
Accrued turnaround costs --- 2,604,232
Income taxes payable - affiliate 2,496,600 1,122,000
----------- -----------
Total current liabilities 16,080,365 17,443,855
----------- -----------
NON-CURRENT LIABILITIES
Deferred income taxes 1,750,300 238,000
Accrued turnaround costs 810,119 ---
Other 151,359 160,692
----------- -----------
Total non-current liabilities 2,711,778 398,692
----------- -----------
Commitments and contingencies (Note 9)
SHAREHOLDER'S EQUITY
Common stock, .01 par value: 1,000
voting shares authorized, issued and
outstanding 10 10
Contributed capital 3,200,090 3,200,090
Retained earnings 23,854,523 16,077,577
----------- -----------
Total shareholder's equity 27,054,623 19,277,677
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $45,846,766 $37,120,224
=========== ===========
The accompanying notes to financial statements are an integral part of
these balance sheets.
BLOOMFIELD REFINING COMPANY
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992
1993 1992
------------ ------------
Operating revenues $148,822,139 $143,974,427
Operating expenses 118,026,762 124,573,250
------------ ------------
Gross margin 30,795,377 19,401,177
General and administrative expenses 8,470,542 8,542,979
------------ ------------
Operating income 22,324,835 10,858,198
------------ ------------
OTHER INCOME (EXPENSE)
(Loss) gain on sale of assets (Note 1) (8,503) 1,495,553
Interest income 259,062 272,471
Interest expense (357,446) (753,046)
Other 15,839 89,671
------------ ------------
(91,048) 1,104,649
------------ ------------
Income before income taxes 22,233,787 11,962,847
INCOME TAX EXPENSE (NOTE 4)
Current (7,635,100) (4,993,000)
Deferred (1,220,800) ---
------------ ------------
(8,855,900) (4,993,000)
------------ ------------
NET INCOME $ 13,377,887 $ 6,969,847
============ ============
STATEMENTS OF RETAINED EARNINGS
Balance at January 1 $ 16,077,577 $ 11,367,632
Net income 13,377,887 6,969,847
Dividends (5,600,941) (2,230,572)
Excess of additional pension liability
over unrecognized prior service cost --- (29,330)
------------ ------------
BALANCE AT DECEMBER 31 $ 23,854,523 $ 16,077,577
============ ============
The accompanying notes to financial statements are an integral part of these
statements.
BLOOMFIELD REFINING COMPANY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992
1993 1992
------------- -------------
Cash flows from operating activities:
Cash received from customers $ 148,745,079 $ 143,704,941
Cash paid to suppliers and employees (122,246,277) (130,035,607)
Cash outlay for turnaround (3,202,273) (3,522)
Interest received 263,429 264,519
Interest paid (359,739) (806,318)
Income taxes paid (6,260,500) (5,062,500)
Other 7,703 135,602
------------- -------------
Net cash provided by operating activities 16,947,422 8,197,115
------------- -------------
Cash flows from investing activities:
Capital expenditures - refinery (8,744,591) (743,730)
Capital expenditures - gas plants (528,826) (2,633,079)
Proceeds from sale of assets 29,657 3,308,618
------------- -------------
Net cash used in investing activities (9,243,760) (68,191)
------------- -------------
Cash flows from financing activities:
Borrowings under term loan agreement 3,000,000 ---
Principal payments on debt (2,892,496) (5,376,267)
Dividends distributed (5,600,941) (2,230,572)
------------- -------------
Net cash used in financing activities (5,493,437) (7,606,839)
------------- -------------
Net increase in cash and temporary investments 2,210,225 522,085
Cash and temporary investments at beginning of year 7,291,275 6,769,190
------------- -------------
Cash and temporary investments at end of year $ 9,501,500 $ 7,291,275
============= =============
The accompanying notes to financial statements are an integral part of these
statements.
BLOOMFIELD REFINING COMPANY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992
1993 1992
----------- -----------
Reconciliation of net income to net cash provided
by operating activities:
Net income $13,377,887 $ 6,969,847
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss (gain) on sale of assets 8,503 (1,495,553)
Depreciation 1,370,415 1,288,601
Accrued turnaround costs 1,014,887 883,716
Changes in assets and liabilities:
Increase in accounts receivable (150,662) (873,550)
Decrease in inventories 1,815,826 37,323
Decrease in prepaid expenses and other 462,695 461,337
Increase in deferred tax asset (291,500) ---
Decrease in other assets --- 387,561
Decrease in accounts payable (787,383) (13,964)
Increase (decrease) in income taxes payable - affiliate 1,374,600 (69,500)
Increase in accrued liabilities 58,187 242,090
(Decrease) increase in accrued turnaround costs (2,809,000) 301,775
(Decrease) increase in other liabilities (9,333) 77,432
Increase in deferred income taxes 1,512,300 ---
----------- -----------
Net cash provided by operating activities $16,947,422 $ 8,197,115
=========== ===========
The accompanying notes to financial statements are an integral part of these
statements.
BLOOMFIELD REFINING COMPANY
NOTES TO FINANCIAL STATEMENTS
(1) BACKGROUND AND ORGANIZATION
---------------------------
Organization
- ------------
On August 31, 1984, Bloomfield Refining Company, a Delaware
corporation (the Company), was incorporated. The Company's primary
activities are the refining of petroleum products and gas plant
operations. The Company is a wholly-owned subsidiary of
Gary-Williams Energy Corporation (GWEC). The Company operates a
refinery in Bloomfield, New Mexico with a throughput capacity of
17,000 barrels per day and has ownership interests in two gas
plants located in Utah.
Gas Plants
- ----------
On August 7, 1992, the Company purchased an additional
twenty-six percent (26%) undivided interest in a gas plant GWEC
operates in Uintah and Duchesne Counties, Utah for cash and a
promissory note, paid in full in September, 1992. Net ownership
income of $455,750, including interest expense, from the effective
date of the purchase, March 1, 1992, through July 31, 1992 relating
to the increased ownership interest was offset against the gross
purchase price of $2,550,000.
On December 8, 1992, the Company increased its ownership
interest in the same gas plant GWEC operates in Uintah and Duchesne
Counties, Utah to approximately forty-eight percent (48%) by
purchasing another ten percent (10%) undivided interest from a
third party. Net ownership income of $134,508 from the effective
date of the purchase, September 1, 1992, through November 30, 1992,
relating to the increased ownership interest was offset against the
gross purchase price of $612,168.
During 1992, the Company sold all rights, title and interest in
a gas plant gathering system, an extraction plant, and certain
related equipment and appurtenances located in Colorado to third
parties, resulting in a gain on sale of gas plant assets of
$1,495,553.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Cash and Temporary Investments
- ------------------------------
For purposes of these statements, the Company considers
investments purchased with an original maturity of three months or
less to be cash or temporary investments.
Inventories
- -----------
Inventories are valued at the lower of first-in, first-out
cost or market. Inventories at December 31, 1993 and 1992, are as
follows:
December 31, December 31,
1993 1992
----------- -----------
Refined, unrefined and intermediate products $3,692,757 $5,361,150
Crude oil 1,432,350 1,580,418
Materials and supplies 920,919 920,284
---------- ----------
$6,046,026 $7,861,852
========== ==========
Property, Plant and Equipment
- -----------------------------
The initial purchase and additions to property, plant and
equipment are recorded at cost. Depreciation is provided using the
straight-line method based on estimated useful lives ranging from 2
to 35 years, with an average life of approximately 19 years.
Ownership interests in gas plants are recorded at cost and
proportionately consolidated for financial statement purposes.
Depreciation is provided using the straight-line method with
estimated useful lives ranging from 5 to 10 years, with an average
life of approximately 7 years.
General and Administrative Expenses
- -----------------------------------
The Company reimburses GWEC for general and administrative
services relating to the supply and marketing of raw materials and
refined products and gas plant operations.
Accrued Turnaround Costs
- ------------------------
Major repair and maintenance expenses (turnaround costs) are
accrued and charged to current operations in anticipation of the
work to be performed in future periods to renew the related
refinery assets. Accrued turnaround costs are classified as either
current or non-current liabilities based upon the scheduling of
major expenditures.
Capitalized Interest
- --------------------
The Company capitalizes interest on debt associated with the
financing of capital construction projects. During 1993, interest
of $109,480 was capitalized to property, plant and equipment.
Reclassifications
- -----------------
Certain prior year amounts have been reclassified to conform
with the current year presentation.
(3) LONG-TERM DEBT
--------------
The Company has a revolving credit facility with a bank under
which it may borrow up to $5,000,000 in cash and/or issue letters
of credit which in the aggregate cannot exceed the lesser of
$35,000,000 or the borrowing base. The borrowing base, which
consists principally of accounts receivable, inventory, and
exchange balances was approximately $18,000,000 and $22,000,000 as
of December 31, 1993 and 1992. The Company had no amounts
outstanding under the revolving credit facility, however, letters
of credit totalling approximately $14,000,000 and $18,000,000 had
been issued as of December 31, 1993 and 1992.
The revolving credit facility and a related term loan facility
bear interest at a rate based on the bank's prime rate.
Alternatively, interest rates can be fixed for 30, 60, or 90 day
periods on portions of the term loan at a floating Eurocurrency
rate. The term notes called for minimum monthly principal payments
of $354,167 with the final payment due in August, 1993; however,
the Company prepaid the loan in June, 1993. At December 31, 1992,
the weighted average interest rate being paid was approximately
6.5%. The credit facility and related term loan are secured by
substantially all of the assets of the Company and, among other
things, requires the maintenance of certain financial covenants and
ratios. The revolving credit facility matures November 15, 1994;
however, the credit agreement provides for extensions of the
maturity date.
The Company borrowed $3,000,000 for capital projects at the
Bloomfield refinery pursuant to an October 15, 1992 amendment to
the credit agreement. Interest is based on the bank's prime rate
or alternatively, interest rates can be fixed for 30, 60 or 90 day
periods on portions of the term loan at a floating Eurocurrency
rate. At December 31, 1993, the weighted average interest rate
being paid was approximately 6.2%. This loan is being amortized
monthly over two years commencing December, 1993. Additional loan
payments are required when operating cash flows exceed levels as
defined in the credit agreement. However, the entire balance has
been classified as current in the accompanying financial statements
as management expectS to pay the entire balance before December
31, 1994.
(4) INCOME TAXES
------------
The Company and GWEC are members of a consolidated tax group
which files a consolidated federal income tax return. An agreement
was entered into between the Company and GWEC whereby the Company
determines, on a stand alone basis, the tax liability or benefit as
if it were not a member of the tax group. The Company then
reimburses GWEC for its income tax liability. The Company is
entitled to be reimbursed by GWEC for its income tax benefit when
the Company could otherwise have utilized such benefit on a stand
alone basis.
Effective January 1, 1993, the Company adopted the provisions
of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes", (SFAS 109). SFAS 109 requires that deferred
income taxes be recognized for the differences between the tax and
financial reporting bases of assets and liabilities at each year-
end based on enacted tax laws and statutory tax rates. Valuation
allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. The adoption of SFAS
109 had no material impact on the Company's financial position or
results of operations for the year ended December 31, 1993.
The net deferred tax liability as of December 31, 1993 consists of
the following:
Gross deferred tax assets $ (606,640)
Gross deferred tax liabilities 2,065,440
----------
1,458,800
Valuation allowance ---
----------
Net deferred tax liability $1,458,800
==========
Deferred tax assets and liabilities result primarily from
inventory costs capitalized for tax, accounting reserves and from
recording depreciation and turnaround expenses in different periods
for financial and tax accounting purposes. In management's
opinion, it is more likely than not that the gross deferred tax
assets will be realized based on past earnings history.
The difference between the Company's tax provision at the
federal statutory rate and the effective rate for the years ended
December 31, 1993 and 1992 is due primarily to state income taxes.
(5) OPERATING REVENUES AND EXPENSES BY SEGMENTS
--------------------------------------------
The following segment information reflects operating revenues,
operating expenses and gross margins for the years ended December
31, 1993 and 1992.
Refining Gas Plants Total
------------ ---------- ------------
December 31, 1993
------------------------------------------
Operating Revenues $145,878,017 $2,944,122 $148,822,139
Operating Expenses 115,829,494 2,197,268 118,026,762
------------ ---------- ------------
Gross Margin $ 30,048,523 $ 746,854 $ 30,795,377
============ ========== ============
December 31, 1992
------------------------------------------
Operating Revenues $140,088,307 $3,886,120 $143,974,427
Operating Expenses 122,005,814 2,567,436 124,573,250
------------ ---------- ------------
Gross Margin $ 18,082,493 $1,318,684 $ 19,401,177
============ ========== ============
(6) RELATED PARTY TRANSACTIONS
--------------------------
A supply and marketing service agreement was entered into
between the Company and GWEC, whereas GWEC purchases crude oil and
other raw materials for resale to the Company, at cost, for
processing at the refinery. The intercompany purchase of raw
materials includes all amounts accrued and owing by GWEC to third
parties, including prepayments and offsite inventory. Also, the
Company sells refined petroleum products to GWEC, at market, for
resale by GWEC.
On December 1, 1993 and 1992, the Company guaranteed the
payment of GWEC of an aggregate maximum at any one time of
$2,000,000 of present and/or future indebtedness owed to a third
party crude supplier.
(7) EMPLOYEE BENEFIT PLANS
----------------------
The Company has a profit sharing plan (defined contribution
plan) covering certain non-union employees who meet eligibility
requirements as to age and length of service. Contributions to the
plan are determined annually by the Company. Contributions of
$173,139 and $169,002 were accrued for the years ended December 31,
1993 and December 31, 1992, respectively.
The Company also has a defined benefit pension plan for union
employees. The benefits are based on a percentage of the
employee's final earnings, as defined, and years of credited
service, up to a maximum of 30 years. The Company's funding policy
is to contribute annually an amount to fund normal cost and
amortize unfunded actuarial liabilities over 19 years. Plan assets
at December 31, 1993 and 1992 consist primarily of private and
public debt and equity investments.
The following table sets forth the funded status and amounts
recognized in the Company's statements of financial position and
operations at December 31, 1993 and 1992:
1993 1992
--------- ---------
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $406,405 and $364,702 at
December 31, 1993 and 1992, respectively $(424,162) $(377,359)
========= =========
Projected benefit obligation for service rendered to date $(424,162) $(377,359)
Plan assets at fair value 272,803 216,667
--------- ---------
Projected benefit obligation in excess of plan assets (151,359) (160,692)
Unrecognized net obligation existing at January 1 9,590 10,255
Prior service cost not yet recognized 14,091 14,951
Unrecognized net loss from past experience different from
that assumed and effects of changes in assumptions 160,797 176,517
Adjustment to recognize minimum liability (184,478) (201,723)
--------- ---------
Accrued pension liability included in other liabilities $(151,359) $(160,692)
========= =========
Net pension cost includes the following components:
Service cost $ 49,580 $ 35,988
Interest cost 23,202 18,060
Actual return on plan assets (31,641) (18,597)
Net amortization and deferral of other components 20,237 6,712
--------- ---------
Net periodic pension cost $ 61,378 $ 42,163
========= =========
The discount rate used in determining the actuarial present value
of the projected benefit obligation was 6.00% and 5.75% for 1993 and
1992, respectively. The average rate of increase in future
compensation levels was 0% and the expected long-term rate of return on
pension plan assets was 8.0% and 9.0% in 1993 and 1992, respectively.
(8) MAJOR CUSTOMERS AND SUPPLIERS
-----------------------------
During the years ended December 31, 1993 and 1992, the Company
sold 100% of the refined products to GWEC. Also, during that period,
the Company purchased 100% of the crude oil and raw materials from
GWEC.
(9) COMMITMENTS AND CONTINGENCIES
-----------------------------
The Company is subject to certain environmental and other
regulations primarily administered by the United States Environmental
Protection Agency and various state agencies. Management of the
Company believes it has complied with all material aspects associated
with these regulations. In December, 1992, the Company entered into an
administrative order with the Environmental Protection Agency to
perform certain environmental work. An environmental liability reserve
in the amount of $362,000 was accrued in 1992 for work to be performed
in 1993 and 1994 to assess the nature of any environmental cleanup
requirements at the refinery. As of December 31, 1993, the cash outlay
recorded against the reserve was $87,759.
The Company is subject to various claims and business disputes in
the ordinary course of business. Management does not anticipate that
the ultimate outcome of these issues will have a material impact on the
Company's financial position or results of operations.
An affiliate of the Company entered into a ten year lease
agreement for office space in November 1989. The Company has
guaranteed the performance of the affiliate's obligations. Terms of
the lease provide for annual rentals of $490,000 in the fourth year
(1993) and escalating to $796,000 in years six through ten. In
addition to the rent, the Company has guaranteed the annual payment of
$276,000 in occupancy costs with provisions for escalation based on
actual expenses. The total estimated costs for rentals and operating
expenses for 1994 amounts to $871,000. Currently, the affiliate of the
Company is subleasing certain office space to a third party and a
related party.
ARTHUR ANDERSEN LLP
BLOOMFIELD REFINING COMPANY
FINANCIAL STATEMENTS
TOGETHER WITH REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
AS OF DECEMBER 31, 1994 AND 1993
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder of Bloomfield Refining Company:
We have audited the accompanying balance sheets of Bloomfield
Refining Company (a Delaware corporation) as of December 31,
1994 and 1993, and the related statements of operations,
retained earnings and cash flows for the years then ended.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Bloomfield Refining Company as of December 31,
1994 and 1993, and the results of its operations and its cash
flows for the years then ended in conformity with generally
accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Denver, Colorado,
March 30, 1995.
BLOOMFIELD REFINING COMPANY
BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
ASSETS
CURRENT ASSETS 1994 1993
----------- -----------
Cash and temporary investments $ 8,379,601 $10,800,111
Accounts receivable - affiliates 6,008,872 5,646,661
Accounts receivable 257,820 35,783
Inventories 7,887,826 6,046,026
Prepaid crude oil - affiliate 2,312,338 819,868
Prepaid expenses and other 584,495 879,839
Deferred tax asset --- 291,500
----------- -----------
Total current assets 25,430,952 24,519,788
----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Refinery property, plant and equipment 23,165,353 22,177,094
Gas plants, property and equipment 4,855,654 4,652,324
Less: Accumulated depreciation (6,550,919) (4,854,519)
----------- -----------
21,470,088 21,974,899
Construction in progress 147,712 409,970
----------- -----------
Total property, plant and equipment 21,617,800 22,384,869
----------- -----------
Other 289,005 240,720
----------- -----------
TOTAL ASSETS $47,337,757 $47,145,377
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES 1994 1993
----------- -----------
Accounts payable - affiliates $10,853,802 $ 8,513,020
Accounts payable 649,983 935,698
Current portion of long-term debt --- 2,875,000
Accrued liabilities 2,227,067 2,558,658
Income taxes payable - affiliate --- 2,496,600
----------- -----------
Total current liabilities 13,730,852 17,378,976
----------- -----------
NON-CURRENT LIABILITIES
Deferred income taxes, net 1,184,500 1,750,300
Accrued turnaround costs 1,953,671 810,119
Other 130,312 151,359
----------- -----------
Total non-current liabilities 3,268,483 2,711,778
----------- -----------
Commitments and contingencies (Note 9)
SHAREHOLDER'S EQUITY
Common stock, .01 par value: 1,000
voting shares authorized, issued and
outstanding 10 10
Contributed capital 3,200,090 3,200,090
Retained earnings 27,138,322 23,854,523
----------- -----------
Total shareholder's equity 30,338,422 27,054,623
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $47,337,757 $47,145,377
=========== ===========
The accompanying notes to financial statements are an integral part of
these balance sheets.
BLOOMFIELD REFINING COMPANY
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
1994 1993
------------ ------------
Operating revenues $141,701,590 $148,822,139
Operating expenses 114,999,480 118,026,762
------------ ------------
Gross margin 26,702,110 30,795,377
General and administrative expenses 7,529,972 8,470,542
------------ ------------
Operating income 19,172,138 22,324,835
------------ ------------
OTHER INCOME (EXPENSE)
Gain (loss) on sale of assets 8,568 (8,503)
Interest income 375,022 259,062
Interest expense (265,862) (357,446)
Other 268,858 15,839
------------ ------------
386,586 (91,048)
------------ ------------
Income before income taxes 19,558,724 22,233,787
INCOME TAX EXPENSE (NOTE 4)
Current (7,396,500) (7,635,100)
Deferred (248,800) (1,220,800)
------------ ------------
(7,645,300) (8,855,900)
------------ ------------
Net Income $ 11,913,424 $ 13,377,887
============ ============
STATEMENTS OF RETAINED EARNINGS
Balance at January 1 $ 23,854,523 $ 16,077,577
Net income 11,913,424 13,377,887
Dividends (8,629,625) (5,600,941)
------------ ------------
BALANCE AT DECEMBER 31 $ 27,138,322 $ 23,854,523
============ ============
The accompanying notes to financial statements are an integral part of these
statements.
BLOOMFIELD REFINING COMPANY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
1994 1993
------------- -------------
Cash flows from operating activities:
Cash received from customers $ 141,129,762 $ 148,745,079
Cash paid to suppliers and employees (120,708,328) (120,947,666)
Cash outlay for turnaround --- (3,202,273)
Interest received 382,751 263,429
Interest paid (266,117) (359,739)
Income taxes (10,416,200) (6,260,500)
Other 266,933 7,703
------------- -------------
Net cash provided by operating activities 10,388,801 18,246,033
------------- -------------
Cash flows from investing activities:
Capital expenditures - refinery (1,276,862) (8,744,591)
Capital expenditures - gas plants (29,574) (528,826)
Proceeds from sale of assets 1,750 29,657
------------- -------------
Net cash used in investing activities (1,304,686) (9,243,760)
------------- -------------
Cash flows from financing activities:
Borrowings under revolving credit agreement --- 3,000,000
Principal payments on debt (2,875,000) (2,892,496)
Dividends distributed (8,629,625) (5,600,941)
------------- -------------
Net cash used in financing activities (11,504,625) (5,493,437)
------------- -------------
Net (decrease) increase in cash and temporary investments (2,420,510) 3,508,836
Cash and temporary investments at beginning of year 10,800,111 7,291,275
------------- -------------
Cash and temporary investments at end of year $ 8,379,601 $ 10,800,111
============= =============
The accompanying notes to financial statements are an integral part of these
statements.
BLOOMFIELD REFINING COMPANY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
1994 1993
----------- -----------
Reconciliation of net income to net cash provided
by operating activities:
Net income $11,913,424 $13,377,887
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,739,979 1,370,415
Accrued turnaround costs 1,143,552 1,014,887
(Gain) loss on sale of assets (8,568) 8,503
Changes in assets and liabilities:
Increase in accounts receivable (584,248) (150,662)
(Increase) decrease in inventories (1,841,800) 1,815,826
(Increase) decrease in prepaid expenses and other (1,370,882) 462,695
Decrease (increase) in deferred tax asset 291,500 (291,500)
Increase in other assets (48,285) ---
Increase (decrease) in accounts payable 2,569,167 (787,383)
(Decrease) increase in accrued liabilities (331,591) 1,356,798
(Decrease) increase in income taxes payable - affiliate (2,496,600) 1,374,600
Decrease in accrued turnaround costs --- (2,809,000)
Decrease in other liabilities (21,047) (9,333)
(Decrease) increase in deferred income taxes (565,800) 1,512,300
----------- -----------
Net cash provided by operating activities $10,388,801 $18,246,033
=========== ===========
The accompanying notes to financial statements are an integral part of these
statements.
BLOOMFIELD REFINING COMPANY
NOTES TO FINANCIAL STATEMENTS
(1) BACKGROUND AND ORGANIZATION
---------------------------
Organization
- ------------
On August 31, 1984, Bloomfield Refining Company, a Delaware
corporation (the Company), was incorporated. The Company's primary
activities are the refining of petroleum products and gas plant
operations. The Company is a wholly-owned subsidiary of
Gary-Williams Energy Corporation (GWEC). The Company operates a
refinery in Bloomfield, New Mexico with a throughput capacity of
17,000 barrels per day and has ownership interests in two gas
plants located in Utah.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Cash and Temporary Investments
- ------------------------------
For purposes of these statements, the Company considers
investments purchased with an original maturity of three months or
less to be cash or temporary investments. Temporary investments
consist primarily of certificates of deposit and commercial paper.
These securities are classified as held to maturity investments as
defined by Statement of Financial Accounting Standards No. 115. At
December 31, 1994 and 1993, these securities are recorded at a
market value of $7,663,000 and $8,520,000, respectively. Realized
gains and losses from sales of these securities are included in
interest income in the accompanying statements of operations. The
net unrealized gain or loss on these securities was not material as
of December 31, 1994 and 1993.
Inventories
- -----------
Inventories are valued at the lower of first-in, first-out
cost or market. Inventories at December 31, 1994 and 1993 are as
follows:
December 31, December 31,
1994 1993
----------- -----------
Refined, unrefined and intermediate products $4,181,728 $3,692,757
Crude oil 2,811,004 1,432,350
Materials and supplies 895,094 920,919
---------- ----------
$7,887,826 $6,046,026
========== ==========
Property, Plant and Equipment
- -----------------------------
The initial purchase and additions to property, plant and
equipment are recorded at cost. Depreciation is provided using the
straight-line method based on estimated useful lives ranging from 2
to 35 years, with an average initial life of approximately 19
years.
Ownership interests in gas plants are recorded at cost and
proportionately consolidated for financial statement purposes.
Depreciation is provided using the straight-line method with
estimated useful lives ranging from 5 to 10 years, with an average
initial life of approximately 7 years.
General and Administrative Expenses
- -----------------------------------
The Company reimburses GWEC for general and administrative
services relating to the supply and marketing of raw materials and
refined products and gas plant operations.
Accrued Turnaround Costs
- ------------------------
Major repair and maintenance expenses (turnaround costs) are
accrued and charged to current operations in anticipation of the
work to be performed in future periods to renew the related
refinery assets. Accrued turnaround costs are classified as either
current or non-current liabilities based upon the scheduling of
major expenditures.
Capitalized Interest
- --------------------
The Company capitalizes interest on debt associated with the
financing of capital construction projects. During 1993 interest
of $109,480 was capitalized to property, plant and equipment. No
such interest was capitalized during 1994.
Reclassifications
- -----------------
Certain prior year amounts have been reclassified for
consistency with the current year presentation.
(3) LONG-TERM DEBT
--------------
The Company has a revolving credit facility, as amended, with
a group of banks under which it may borrow up to $8,000,000 in cash
and/or issue letters of credit which in the aggregate cannot exceed
the lesser of $35,000,000 or the borrowing base. The borrowing
base, which consists principally of accounts receivable, inventory,
exchange balances and unused outstanding letters of credit was
approximately $21,000,000 and $18,000,000 as of December 31, 1994
and 1993. The Company had no amounts outstanding under the
revolving credit facility, however, letters of credit totaling
approximately $20,000,000 and $14,000,000 had been issued as of
December 31, 1994 and 1993. Borrowings under the revolving credit
facility bear interest at a rate based on the bank's prime rate.
The credit facility is secured by substantially all of the
assets of the Company and, among other things, requires the
maintenance of certain financial covenants and ratios. The
revolving credit facility matures June 1, 1996; however, the credit
agreement provides for extensions of the maturity date.
The Company borrowed $3,000,000 in 1993 for capital projects
at the Bloomfield refinery pursuant to an amendment to the credit
agreement. Interest was based on the bank's prime rate or
alternatively, interest rates could be fixed for 30, 60 or 90 day
periods on portions of the term loan at a floating Eurocurrency
rate. At December 31, 1993, the weighted average interest rate
being paid was approximately 6.2%. The entire balance was paid
during 1994.
(4) INCOME TAXES
------------
The Company and GWEC are members of a consolidated tax group
which files a consolidated federal income tax return. An agreement
was entered into between the Company and GWEC whereby the Company
determines, on a stand alone basis, the tax liability or benefit as
if it were not a member of the tax group. The Company then
reimburses GWEC for its current income tax liability on a quarterly
basis. Deferred income taxes are paid to GWEC periodically. The
Company is entitled to be reimbursed by GWEC for its income tax
benefit when the Company could otherwise have utilized such benefit
on a stand alone basis.
Effective January 1, 1993, the Company adopted the provisions
of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes", (SFAS 109). SFAS 109 requires that deferred
income taxes be recognized for the differences between the tax and
financial reporting bases of assets and liabilities at each year-
end based on enacted tax laws and statutory tax rates. Valuation
allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. The adoption of SFAS
109 had no material impact on the Company's financial position or
results of operations for the year ended December 31, 1993.
The net deferred tax liability consists of the following:
December 31, December 31,
1994 1993
------------ ------------
Gross deferred tax assets $(1,090,700) $ (606,640)
Gross deferred tax liabilities 2,798,300 2,065,440
----------- -----------
1,707,600 1,458,800
Payments to affiliate (523,100) ---
Valuation allowance --- ---
----------- -----------
Net deferred tax liability $ 1,184,500 $ 1,458,800
=========== ===========
Deferred tax assets and liabilities result primarily from
inventory costs capitalized for tax, accounting reserves and from
recording depreciation and turnaround expenses in different periods
for financial and tax accounting purposes. In management's
opinion, it is more likely than not that the gross deferred tax
assets will be realized based on past earnings history.
The difference between the Company's tax provision at the
federal statutory rate and the effective rate for the years ended
December 31, 1994 and 1993 is due primarily to state income taxes.
Tax Deficiency
- --------------
The Internal Revenue Service concluded a field audit of the
consolidated tax group's income tax return for the fiscal year 1990
resulting in a "Notice of Deficiency" for that fiscal year.
Proposed adjustments to income and tax credits resulted in a
proposed tax deficiency of approximately $4,800,000 plus penalties.
The Company filed a petition with the United States Tax Court
contesting the notice and believes that it has meritorious legal
defenses to the proposed tax deficiency, but the ultimate outcome
of the Tax Court case is uncertain.
(5) OPERATING REVENUES AND EXPENSES BY SEGMENTS
--------------------------------------------
The following segment information reflects operating revenues,
operating expenses and gross margins for the years ended December
31, 1994 and 1993.
Refining Gas Plants Total
------------ ---------- ------------
December 31, 1994
------------------------------------------
Operating Revenues $139,073,511 $2,628,079 $141,701,590
Operating Expenses 112,824,818 2,174,662 114,999,480
------------ ---------- ------------
Gross Margin $ 26,248,693 $ 453,417 $ 26,702,110
============ ========== ============
December 31, 1993
------------------------------------------
Operating Revenues $145,878,017 $2,944,122 $148,822,139
Operating Expenses 115,829,494 2,197,268 118,026,762
------------ ---------- ------------
Gross Margin $ 30,048,523 $ 746,854 $ 30,795,377
============ ========== ============
(6) RELATED PARTY TRANSACTIONS
--------------------------
A supply and marketing service agreement was entered into
between the Company and GWEC, whereby GWEC purchases crude oil and
other raw materials for resale to the Company, at cost, for
processing at the refinery. The intercompany purchase of raw
materials include all amounts accrued and owing by GWEC to third
parties, including prepayments and offsite inventory. Also, the
Company sells refined petroleum products to GWEC, at market, for
resale by GWEC.
The Company has guaranteed the payment by GWEC of an aggregate
maximum at any one time of $2,000,000 of present and/or future
indebtedness owed to a third party crude oil supplier.
(7) EMPLOYEE BENEFIT PLANS
----------------------
The Company has a profit sharing plan (defined contribution
plan) covering certain non-union employees who meet eligibility
requirements as to age and length of service. Contributions to the
plan are determined annually by the Company. Contributions of
$187,357 and $173,139 were accrued for the years ended December 31,
1994 and 1993, respectively.
The Company also has a defined benefit pension plan for union
employees. The Company's funding policy is to contribute annually
an amount to fund normal cost and amortize unfunded actuarial
liabilities over 19 years. Plan assets at December 31, 1994 and
1993 consist primarily of private and public debt and equity
investments.
In prior years, benefits were based on a percentage of the
employee's earnings, as defined, as of June 1, 1990, and years of
credited service up to a maximum of 30 years. In 1994, the plan
was amended to base benefits on a percentage of the employee's
earnings as of June 1, 1993.
The following table sets forth the funded status and amounts
recognized in the Company's statements of financial position and
operations at December 31, 1994 and 1993, for the defined benefit
pension plan:
1994 1993
--------- ---------
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $417,559 and $406,405 at
December 31, 1994 and 1993, respectively $(433,264) $(424,162)
========= =========
Projected benefit obligation for service rendered to date $(433,264) $(424,162)
Plan assets at fair value 302,952 272,803
--------- ---------
Projected benefit obligation in excess of plan assets (130,312) (151,359)
Unrecognized net obligation existing at January 1, 1989
being recognized over 19 years 8,926 9,590
Prior service cost not yet recognized 77,483 14,091
Unrecognized net loss from past experience different from
that assumed and effects of changes in assumptions 70,391 160,797
Adjustment to recognize minimum liability (156,800) (184,478)
--------- ---------
Accrued pension liability included in other liabilities $(130,312) $(151,359)
========= =========
Net pension cost includes the following components:
Service cost $ 55,079 $ 49,580
Interest cost 29,266 23,202
Actual return on plan assets 6,557 (31,641)
Net amortization and deferral of other components (19,922) 20,237
--------- ---------
Net periodic pension cost $ 70,980 $ 61,378
========= =========
The discount rate used in determining the actuarial present value
of the projected benefit obligation was 7.0% for 1994 and 6.0% for
1993. The expected long-term rate of return on pension plan assets was
8.0% in 1994 and 1993.
(8) MAJOR CUSTOMERS
---------------
During the years ended December 31, 1994 and 1993, the Company
sold 100% of the refined products to GWEC. Also, during that period,
the Company purchased 100% of the crude oil and raw materials from
GWEC.
(9) COMMITMENTS AND CONTINGENCIES
-----------------------------
The Company is subject to certain environmental and other
regulations primarily administered by the United States Environmental
Protection Agency (E.P.A.) and various state agencies. Management of
the Company believes it has complied with all material aspects
associated with these regulations. The Company entered into an
administrative order with the E.P.A. to perform a study to assess the
nature of any environmental cleanup requirements at the refinery which
was substantially completed in 1994. Management is currently
evaluating the E.P.A.'s response and is uncertain as to what, if any,
additional costs may be required.
The Company is subject to various claims and business disputes in
the ordinary course of business. Management does not anticipate that
the ultimate outcome of these issues will have a material impact on the
Company's financial position or results of operations.
An affiliate of the Company entered into a ten year lease
agreement for office space in November 1989. The Company has
guaranteed the performance of the affiliate's obligations. Terms of
the lease provided for annual rent of $553,000 in 1994 and escalating
to $796,000 in years six through ten. In addition to the rent, the
Company has guaranteed the annual payment of $318,000 in occupancy
costs with provisions for escalation based on actual expenses.
Currently, the affiliate of the Company is subleasing certain office
space to a third party and a related party.
BLOOMFIELD REFINING COMPANY
INTERIM FINANCIAL STATEMENTS
AS OF MARCH 31, 1995
(UNAUDITED)
BLOOMFIELD REFINING COMPANY
BALANCE SHEETS
MARCH 31, 1995 AND DECEMBER 31, 1994
ASSETS
March 31,
1995 December 31,
CURRENT ASSETS (Unaudited) 1994
----------- -----------
Cash and temporary investments $ 2,620,153 $ 4,888,567
Accounts receivable - affiliates 7,047,961 6,008,872
Accounts receivable 239,707 257,820
Inventories 9,143,322 7,887,826
Prepaid crude oil - affiliate 6,018,887 5,803,372
Prepaid expenses and other 352,072 584,495
----------- -----------
Total current assets 25,422,102 25,430,952
----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Refinery property, plant and equipment 23,165,353 23,165,353
Gas plants, property and equipment 4,901,295 4,855,654
Less: Accumulated depreciation (6,980,954) (6,550,919)
----------- -----------
21,085,694 21,470,088
Construction in progress 630,830 147,712
----------- -----------
Total property, plant and equipment 21,716,524 21,617,800
----------- -----------
Other 285,394 289,005
----------- -----------
TOTAL ASSETS $47,424,020 $47,337,757
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
March 31,
1995 December 31,
CURRENT LIABILITIES (Unaudited) 1994
----------- -----------
Accounts payable - affiliates $11,408,489 $10,853,802
Accounts payable 449,592 649,983
Accrued liabilities 2,238,788 2,227,067
Income taxes payable - affiliate 963,000 ---
----------- -----------
Total current liabilities 15,059,869 13,730,852
----------- -----------
NON-CURRENT LIABILITIES
Deferred income taxes, net 9,500 1,184,500
Accrued turnaround costs 2,239,559 1,953,671
Other 114,733 130,312
----------- -----------
Total non-current liabilities 2,363,792 3,268,483
----------- -----------
Commitments and contingencies (Note 9)
SHAREHOLDER'S EQUITY
Common stock, .01 par value 1,000
voting shares authorized, issued and
outstanding 10 10
Contributed capital 3,200,090 3,200,090
Retained earnings 26,800,259 27,138,322
----------- -----------
Total shareholder's equity 30,000,359 30,338,422
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $47,424,020 $47,337,757
=========== ===========
The accompanying notes to financial statements are an integral part of
these balance sheets.
BLOOMFIELD REFINING COMPANY
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
1995 1994
------------ ------------
Operating revenues $ 29,962,961 $ 29,495,052
Operating expenses 25,799,986 24,052,808
------------ ------------
Gross margin 4,162,975 5,442,244
General and administrative expenses 1,740,486 1,795,578
------------ ------------
Operating income 2,422,489 3,646,666
------------ ------------
OTHER INCOME (EXPENSE)
Interest income 73,510 68,042
Interest expense (64,197) (81,550)
Other 66,335 25,458
------------ ------------
75,648 11,950
------------ ------------
Income before income taxes 2,498,137 3,658,616
INCOME TAX EXPENSE (NOTE 4)
Current (963,000) (1,350,000)
Deferred (9,500) (43,300)
------------ ------------
(972,500) (1,393,300)
------------ ------------
Net Income $ 1,525,637 $ 2,265,316
============ ============
STATEMENTS OF RETAINED EARNINGS
Balance at January 1 $ 27,138,322 $ 23,854,523
Net income 1,525,637 2,265,316
Dividends (1,863,700) ---
------------ ------------
BALANCE AT MARCH 31 $ 26,800,259 $ 26,119,839
============ ============
The accompanying notes to financial statements are an integral part of these
statements.
BLOOMFIELD REFINING COMPANY
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
1995 1994
----------- -----------
Cash flows from operating activities:
Reconciliation of net income to net cash provided by
(used in) operating activities:
Net income $ 1,525,637 $ 2,265,316
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 430,035 428,055
Accrued turnaround costs 285,888 285,888
Changes in assets and liabilities:
Increase in accounts receivable (1,020,976) (452,743)
Increase in inventories (1,255,496) (441,575)
Decrease in prepaid expenses and other 16,908 426,263
Increase in deferred tax asset --- (21,300)
Decrease in other assets 3,611 3,611
Increase (decrease) in accounts payable 244,523 (1,921,652)
Increase (decrease) in accrued liabilities 11,721 (219,324)
Increase in income taxes payable-affiliate 963,000 1,350,000
Decrease in other liabilities (15,579) ---
(Decrease) increase in deferred income taxes (1,175,000) 64,600
----------- -----------
Net cash (used in) provided by operating activities $ 14,272 $ 1,767,139
=========== ===========
Cash flows used in investing activities:
Capital expenditures - refinery (373,345) (756,002)
Capital expenditures - gas plants (45,641) (15,889)
----------- -----------
Net cash used in investing activities (418,986) (771,891)
----------- -----------
Cash flows used in financing activities:
Principal payments on debt --- (975,000)
Dividends distributed (1,863,700) ---
----------- -----------
Net cash used in financing activities (1,863,700) (975,000)
----------- -----------
Net (decrease) increase in cash and temporary investments (2,268,414) 20,248
Cash and temporary investments at beginning of year 4,888,567 9,501,500
----------- -----------
Cash and temporary investments at end of period $ 2,620,153 $ 9,521,748
=========== ===========
The accompanying notes to financial statements are an integral part of these
statements.
BLOOMFIELD REFINING COMPANY
NOTES TO FINANCIAL STATEMENTS
(1) BACKGROUND AND ORGANIZATION
---------------------------
Organization
- ------------
On August 31, 1984, Bloomfield Refining Company, a Delaware
corporation (the Company), was incorporated. The Company's primary
activities are the refining of petroleum products and gas plant
operations. The Company is a wholly-owned subsidiary of
Gary-Williams Energy Corporation (GWEC). The Company operates a
refinery in Bloomfield, New Mexico with a throughput capacity of
17,000 barrels per day and has ownership interests in two gas
plants located in Utah.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Cash and Temporary Investments
- ------------------------------
For purposes of these statements, the Company considers
investments purchased with an original maturity of three months or
less to be cash or temporary investments. Temporary investments
consist primarily of commercial paper and money market funds.
These securities are classified as held to maturity investments as
defined by Statement of Financial Accounting Standards No. 115. At
March 31, 1995 and December 31, 1994, these securities are recorded
at a market value of $2,082,000 and $7,663,000, respectively.
Realized gains and losses from sales of these securities are
included in interest income in the accompanying statements of
operations. The net unrealized gain or loss on these securities
was not material as of March 31, 1995 and December 31, 1994.
Inventories
- -----------
Inventories are valued at the lower of first-in, first-out
cost or market. Inventories at March 31, 1995 and December 31,
1994 are as follows:
March 31, December 31,
1995 1994
----------- -----------
Refined, unrefined and intermediate products $5,276,421 $4,181,728
Crude oil 2,985,248 2,811,004
Materials and supplies 881,653 895,094
---------- ----------
$9,143,322 $7,887,826
========== ==========
Property, Plant and Equipment
- -----------------------------
The initial purchase and additions to property, plant and
equipment are recorded at cost. Depreciation is provided using the
straight-line method based on estimated useful lives ranging from 2
to 35 years, with an average initial life of approximately 19
years.
Ownership interests in gas plants are recorded at cost and
proportionately consolidated for financial statement purposes.
Depreciation is provided using the straight-line method with
estimated useful lives ranging from 5 to 10 years, with an average
initial life of approximately 7 years.
General and Administrative Expenses
- -----------------------------------
The Company reimburses GWEC for general and administrative
services relating to the supply and marketing of raw materials and
refined products and gas plant operations.
Accrued Turnaround Costs
- ------------------------
Major repair and maintenance expenses (turnaround costs) are
accrued and charged to current operations in anticipation of the
work to be performed in future periods to renew the related
refinery assets. Accrued turnaround costs are classified as either
current or non-current liabilities based upon the scheduling of
major expenditures.
Capitalized Interest
- --------------------
The Company capitalizes interest on debt associated with the
financing of capital construction projects. No interest was
capitalized during the three months ended March 31, 1995 or during
1994.
Reclassifications
- -----------------
Certain prior year amounts have been reclassified for
consistency with the current year presentation.
(3) LONG-TERM DEBT
--------------
The Company has a revolving credit facility, as amended, with
a group of banks under which it may borrow up to $8,000,000 in cash
and/or issue letters of credit which in the aggregate cannot exceed
the lesser of $35,000,000 or the borrowing base. The borrowing
base, which consists principally of accounts receivable, inventory,
exchange balances and unused outstanding letters of credit was
approximately $29,000,000 and $21,000,000 as of March 31, 1995 and
December 31, 1994. The Company had no amounts outstanding under
the revolving credit facility, however, letters of credit totaling
approximately $23,000,000 and $20,000,000 had been issued as of
March 31, 1995 and December 31, 1994. Borrowings under the
revolving credit facility bear interest at a rate based on the
bank's prime rate.
The credit facility is secured by substantially all of the
assets of the Company and, among other things, requires the
maintenance of certain financial covenants and ratios. The
revolving credit facility matures June 1, 1996; however, the credit
agreement provides for extensions of the maturity date.
The Company borrowed $3,000,000 in 1993 for capital projects
at the Bloomfield refinery pursuant to an amendment to the credit
agreement. The entire balance was paid during 1994.
(4) INCOME TAXES
------------
The Company and GWEC are members of a consolidated tax group
which files a consolidated federal income tax return. An agreement
was entered into between the Company and GWEC whereby the Company
determines, on a stand alone basis, the tax liability or benefit as
if it were not a member of the tax group. The Company then
reimburses GWEC for its current income tax liability on a quarterly
basis. Deferred income taxes are paid to GWEC periodically. The
Company is entitled to be reimbursed by GWEC for its income tax
benefit when the Company could otherwise have utilized such benefit
on a stand alone basis.
Deferred income taxes are recognized for the differences
between the tax and financial reporting bases of assets and
liabilities at each period-end based on enacted tax laws and
statutory tax rates. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to
be realized.
The net deferred tax liability consists of the following:
March 31, December 31,
1995 1994
------------ ------------
Gross deferred tax assets $(1,212,600) $(1,090,700)
Gross deferred tax liabilities 2,929,700 2,798,300
----------- -----------
1,717,100 1,707,600
Payments to affiliate (1,707,600) (523,100)
Valuation allowance --- ---
----------- -----------
Net deferred tax liability $ 9,500 $ 1,184,500
=========== ===========
Deferred tax assets and liabilities result primarily from
inventory costs capitalized for tax, accounting reserves and from
recording depreciation and turnaround expenses in different periods
for financial and tax accounting purposes. In management's
opinion, it is more likely than not that the gross deferred tax
assets will be realized based on past earnings history.
The difference between the Company's tax provision at the
federal statutory rate and the effective rate is due primarily to
state income taxes.
Tax Deficiency
- --------------
The Internal Revenue Service concluded a field audit of the
consolidated tax group's income tax return for the fiscal year 1990
resulting in a "Notice of Deficiency" for that fiscal year.
Proposed adjustments to income and tax credits resulted in a
proposed tax deficiency of approximately $4,800,000 plus penalties.
The Company filed a petition with the United States Tax Court
contesting the notice and believes that it has meritorious legal
defenses to the proposed tax deficiency, but the ultimate outcome
of the Tax Court case is uncertain.
(5) OPERATING REVENUES AND EXPENSES BY SEGMENTS
--------------------------------------------
The following segment information reflects operating revenues,
operating expenses and gross margins for the three months ended
March 31, 1995 and 1994.
Refining Gas Plants Total
------------ ---------- ------------
March 31, 1995
------------------------------------------
Operating Revenues $ 29,359,316 $ 603,645 $ 29,962,961
Operating Expenses 25,223,910 576,076 25,799,986
------------ ---------- ------------
Gross Margin $ 4,135,406 $ 27,569 $ 4,162,975
============ ========== ============
March 31, 1994
------------------------------------------
Operating Revenues $ 28,877,145 $ 617,907 $ 29,495,052
Operating Expenses 23,429,533 623,275 24,052,808
------------ ---------- ------------
Gross Margin $ 5,447,612 $ (5,368) $ 5,442,244
============ ========== ============
(6) RELATED PARTY TRANSACTIONS
--------------------------
A supply and marketing service agreement was entered into
between the Company and GWEC, whereby GWEC purchases crude oil and
other raw materials for resale to the Company, at cost, for
processing at the refinery. The intercompany purchases of raw
materials include all amounts accrued and owing by GWEC to third
parties, including prepayments and offsite inventory. Also, the
Company sells refined petroleum products to GWEC, at market, for
resale by GWEC.
The Company has guaranteed the payment by GWEC of an aggregate
maximum at any one time of $2,000,000 of present and/or future
indebtedness owed to a third party crude oil supplier.
(7) EMPLOYEE BENEFIT PLANS
----------------------
The Company has a profit sharing plan (defined contribution
plan) covering certain non-union employees who meet eligibility
requirements as to age and length of service. Contributions to the
plan are determined annually by the Company. Contributions of
$47,522 and $45,537 were accrued for the three months ended March
31, 1995 and 1994, respectively.
The Company also has a defined benefit pension plan for union
employees. The Company's funding policy is to contribute annually
an amount to fund normal cost and amortize unfunded actuarial
liabilities over 19 years. Plan assets at March 31, 1995 and
December 31, 1994 consist primarily of private and public debt and
equity investments.
Benefits are based on a percentage of the employee's earnings,
as defined, as of June 1, 1993, and years of credited service up to
a maximum of 30 years.
The following table sets forth the funded status and amounts
recognized in the Company's statements of financial position and
operations at December 31, 1994 for the defined benefit pension plan:
1994
---------
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $417,559 at December 31, 1994 $(433,264)
=========
Projected benefit obligation for service rendered to date $(433,264)
Plan assets at fair value 302,952
---------
Projected benefit obligation in excess of plan assets (130,312)
Unrecognized net obligation existing at January 1, 1989
being recognized over 19 years 8,926
Prior service cost not yet recognized 77,483
Unrecognized net loss from past experience different from
that assumed and effects of changes in assumptions 70,391
Adjustment to recognize minimum liability (156,800)
---------
Accrued pension liability included in other liabilities $(130,312)
=========
Net pension cost includes the following components:
Service cost $ 55,079
Interest cost 29,266
Actual return on plan assets 6,557
Net amortization and deferral of other components (19,922)
---------
Net periodic pension cost $ 70,980
=========
The discount rate used in determining the actuarial present
value of the projected benefit obligation was 7.0% for 1994. The
expected long-term rate of return on pension plan assets was 8.0%
in 1994.
(8) MAJOR CUSTOMERS
---------------
During the three months ended March 31, 1995 and 1994, the
Company sold 100% of the refined products to GWEC. Also, during
that period, the Company purchased 100% of the crude oil and raw
materials from GWEC.
(9) COMMITMENTS AND CONTINGENCIES
-----------------------------
The Company is subject to certain environmental and other
regulations primarily administered by the United States
Environmental Protection Agency (E.P.A.) and various state
agencies. Management of the Company believes it has complied with
all material aspects associated with these regulations. The
Company entered into an administrative order with the E.P.A. to
perform a study to assess the nature of any environmental cleanup
requirements at the refinery which was substantially completed in
1994. Management is currently evaluating the E.P.A.'s response and
is uncertain as to what, if any, additional costs may be required.
The Company is subject to various claims and business disputes
in the ordinary course of business. Management does not anticipate
that the ultimate outcome of these issues will have a material
impact on the Company's financial position or results of
operations.
An affiliate of the Company entered into a ten year lease
agreement for office space in November 1989. The Company has
guaranteed the performance of the affiliate's obligations. Terms
of the lease provided for annual rent of $796,000 in 1995 through
1999. In addition to the rent, the Company has guaranteed the
annual payment of $328,000 in occupancy costs with provisions for
escalation based on actual expenses. Currently, the affiliate of
the Company is subleasing certain office space to a third party and
a related party.
BLOOMFIELD REFINING COMPANY
OPERATING RESULTS FOR APRIL, 1995
BBLS/ $/GAL/
DAY BBL $/AMOUNT
------------------------
SALES:
Regular Gasoline 454 $0.6133 $351
Unleaded Gasoline 6,921 0.6333 5,523
Premium Unleaded 653 0.7057 581
#2 Diesel 4,040 0.5933 3,021
#1 Diesel 0 - 0
Jet Fuel JP-4 1,039 0.5933 777
Naphtha 153 0.4341 84
Propane/Butane 21 0.3501 9
#6 Burner Fuel 350 0.1276 56
Saturated LPG 1,136 0.3232 463
Refined Product - Other 0 - 0
------------------------
14,767 $24.52 $10,864
COST OF SALES:
Crude Oil 15,710 $18.54 $8,869
Crude Oil Value Change 0 - (130)
Reduced Crude 124 18.02 67
Butane 0 - 0
Natural Gasoline 441 17.36 230
MTBE 0 - 0
Misc Product - API (Other) 0 - 0
Product Purchases 0 - 0
Inventory Change - Volume (1,375) 27.59 (802)
Inventory Change - Value 0 - (336)
------------------------
14,899 $17.67 $7,897
GROSS MARGIN $6.64 $2,967
Yield 99.11%
PRODUCTION COSTS:
Direct Operating Costs $631
Maintenance 254
Utilities 239
Depreciation 92
-------
$1,216
-------
OTHER COSTS
General and Administrative $590
Interest and Other Expense 0
Interest and Other Income (34)
-------
$556
-------
INCOME BEFORE DIVISIONS $1,195
-------
TRANSPORTATION DIVISION ($34)
PIPELINE DIVISION 17
GAS PLANTS - BLUEBELL/ALTONAH 13
-------
TOTAL DIVISIONS ($4)
-------
INCOME (LOSS) BEFORE TAXES $1,191
-------
PROVISION FOR INCOME TAXES (463)
-------
NET INCOME (LOSS) AFTER TAXES $728
=======
/TABLE
BLOOMFIELD REFINING COMPANY
STATEMENT OF CASH FLOWS
FOR THE FOUR MONTHS ENDED APRIL 30, 1995
INCREASE (DECREASE) IN CASH AND TEMPORARY INVESTMENTS
MONTH Y-T-D
---------- ----------
Reconciliation of net income to net cash provided
by operating activities:
Net Income (Loss) 858,795 2,505,649
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 143,182 573,217
Turnaround costs 95,296 381,184
(Gain) loss on Sale of Assets 0 0
Changes in assets and liabilities:
Decrease (increase) in accounts receivable-affiliate (4,262,448) (5,152,298)
Decrease (increase) in accounts receivable, net 97,396 14,008
Decrease (increase) in inventories 39,777 (1,215,720)
Decrease (increase) in prepaid expenses 91,217 (3,744,982)
Decrease (increase) in deferred tax asset 0 0
Decrease (increase) in other assets 1,204 4,815
Decrease (increase) in interco def inc tax rec 0 0
Increase (decrease) in accounts payable - affiliate 372,033 (1,709,383)
Increase (decrease) in accounts payable 2,474,103 4,193,931
Increase (decrease) in income tax payable 463,000 1,249,000
Increase (decrease) in accrued liabilities (105,416) (1,716,545)
Increase (decrease) in other liabilities 0 26,487
Increase (decrease) in deferred income taxes 0 (1,184,500)
---------- ----------
Net cash provided (used) by operating activities 268,139 (5,775,137)
---------- ----------
Cash flows from investing activities:
Capital expenditures-refinery and construction in progress (208,537) (635,521)
Capital expenditures-gas plants (59,602) (105,243)
---------- ----------
Net cash provided (used) in investing activities (268,139) (740,764)
---------- ----------
Cash flows from financing activities:
Borrowings under note payable 0 0
Principal payments on debt 0 0
Dividends distributed 0 (1,863,700)
---------- ----------
Net cash provided (used) by financing activities 0 (1,863,700)
---------- ----------
Net increase(decrease) in cash and temporary investments 0 (8,379,601)
Cash and temporary investments at beginning of period 0 8,379,601
---------- ----------
Cash and temporary investments at end of period 0 (0)
========== ==========
BLOOMFIELD REFINING COMPANY
BALANCE SHEETS
APRIL 30, 1995 AND DECEMBER 31, 1994
(UNAUDITED)
ASSETS
APRIL 30 DECEMBER 31
1995 1994
----------- -----------
CURRENT ASSETS
Cash and temporary investments $ --- $ 8,379,601
Accounts receivable - affiliates 11,161,170 6,008,872
Accounts receivable, net 243,812 257,820
Inventories 9,103,546 7,887,826
Prepaid expenses and other 6,641,815 2,896,833
Deferred tax asset --- ---
----------- -----------
Total current assets 27,150,343 25,430,952
----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Refinery property, plant and equipment 23,165,353 23,165,353
Gas plant, property and equipment 4,960,897 4,855,654
Less: Accumulated depreciation (7,124,136) (6,550,919)
----------- -----------
21,002,114 21,470,088
Construction in progress 783,233 147,712
----------- -----------
Total property, plant and equipment 21,785,347 21,617,800
----------- -----------
OTHER ASSETS
Interco Deferred Inc Tax Rec --- ---
Other Assets 284,190 289,005
----------- -----------
Total other assets 284,190 289,005
----------- -----------
TOTAL ASSETS $49,219,880 $47,337,757
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
APRIL 30 DECEMBER 31
CURRENT LIABILITIES 1995 1994
----------- -----------
Accounts payable - affiliates $ 9,144,419 $10,853,802
Accounts payable 4,843,914 649,983
Income taxes payable - affiliate 1,249,000 ---
Accrued liabilities 510,522 2,227,067
----------- -----------
Total current liabilities 15,747,855 13,730,852
----------- -----------
NON-CURRENT LIABILITIES
Deferred income taxes --- 1,184,500
Accrued turnaround costs 2,334,855 1,953,671
Other 156,799 130,312
----------- -----------
Total non-current liabilities 2,491,654 3,268,483
----------- -----------
SHAREHOLDER'S EQUITY
Common stock, .01 par value: 1,000
voting shares authorized, issued and
outstanding 10 10
Contributed capital 3,200,090 3,200,090
Dividends distributed (58,644,838) (56,781,138)
Retained earnings 86,425,109 83,919,460
----------- -----------
Total shareholder's equity 30,980,371 30,338,422
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $49,219,880 $47,337,757
=========== ===========
/TABLE
BLOOMFIELD REFINING COMPANY
OPERATING RESULTS FOR MAY, 1995
BBLS/ $/GAL/
DAY BBL $/AMOUNT
------------------------
SALES:
Regular Gasoline 73 0.6519 $62
Unleaded Gasoline 8,359 0.6792 7,392
Premium Unleaded 1,033 0.7451 1,002
#2 Diesel 5,005 0.6226 4,057
#1 Diesel 0 - 0
Jet Fuel JP-4 978 0.6617 842
Naphtha 267 0.4361 152
Propane/Butane 35 0.3409 16
#6 Burner Fuel 228 0.1262 38
Saturated LPG 1,159 0.3273 494
Refined Product - Other 0 - 0
------------------------
17,137 $26.46 $14,055
COST OF SALES:
Crude Oil 16,103 $18.86 $9,404
Crude Oil Value Change 0 - 9
Reduced Crude 371 21.65 249
Butane 0 - 0
Natural Gasoline 286 18.37 163
MTBE 44 37.04 50
Misc Product - API (Other) 476 26.10 385
Product Purchases 0 - 0
Inventory Change - Volume 224 (22.32) (15)
Inventory Change - Value 0 - (140)
------------------------
17,503 $18.62 $10,105
GROSS MARGIN $7.28 $3,950
Yield 97.91%
PRODUCTION COSTS:
Direct Operating Costs $519
Maintenance 272
Utilities 237
Depreciation 92
-------
$1,119
-------
OTHER COSTS
General and Administrative $576
Interest and Other Expense 0
Interest and Other Income (33)
-------
$543
-------
INCOME BEFORE DIVISIONS $2,288
-------
TRANSPORTATION DIVISION ($28)
PIPELINE DIVISION 26
GAS PLANTS - BLUEBELL/ALTONAH 48
-------
TOTAL DIVISIONS $46
-------
INCOME (LOSS) BEFORE TAXES $2,334
-------
PROVISION FOR INCOME TAXES (908)
-------
NET INCOME (LOSS) AFTER TAXES $1,426
=======
/TABLE
BLOOMFIELD REFINING COMPANY
STATEMENT OF CASH FLOWS
FOR THE FIVE MONTHS ENDED MAY 31, 1995
INCREASE (DECREASE) IN CASH AND TEMPORARY INVESTMENTS
MONTH Y-T-D
---------- ----------
Reconciliation of net income to net cash provided
by operating activities:
Net Income (Loss) 1,582,185 4,065,820
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 142,638 715,855
Turnaround costs 95,296 476,480
(Gain) loss on Sale of Assets 0 0
Changes in assets and liabilities:
Decrease (increase) in accounts receivable-affiliate 3,192,934 (1,959,364)
Decrease (increase) in accounts receivable, net (49,048) (35,040)
Decrease (increase) in inventories (938,822) (2,161,418)
Decrease (increase) in prepaid expenses 13,128 (3,731,853)
Decrease (increase) in deferred tax asset 0 0
Decrease (increase) in other assets 1,204 6,018
Decrease (increase) in interco def inc tax rec 0 0
Increase (decrease) in accounts payable - affiliate 1,667,350 (42,033)
Increase (decrease) in accounts payable (2,517,577) 1,676,355
Increase (decrease) in income tax payable 908,000 2,144,000
Increase (decrease) in accrued liabilities 64,635 (1,651,910)
Increase (decrease) in other liabilities 0 26,487
Increase (decrease) in deferred income taxes 0 (1,184,500)
---------- ----------
Net cash provided (used) by operating activities 4,161,923 (1,655,103)
---------- ----------
Cash flows from investing activities:
Capital expenditures-refinery and construction in progress (155,183) (790,704)
Capital expenditures-gas plants (32,983) (138,226)
---------- ----------
Net cash provided (used) in investing activities (188,166) (928,930)
---------- ----------
Cash flows from financing activities:
Borrowings under note payable 0 0
Principal payments on debt 0 0
Dividends distributed 0 (1,863,700)
---------- ----------
Net cash provided (used) by financing activities 0 (1,863,700)
---------- ----------
Net increase(decrease) in cash and temporary investments 3,973,757 (4,447,733)
Cash and temporary investments at beginning of period (41,889) 8,379,601
---------- ----------
Cash and temporary investments at end of period 3,931,868 3,931,868
========== ==========
BLOOMFIELD REFINING COMPANY
BALANCE SHEETS
MAY 31, 1995 AND DECEMBER 31, 1994
(UNAUDITED)
ASSETS
MAY 31 DECEMBER 31
1995 1994
----------- -----------
CURRENT ASSETS
Cash and temporary investments $ 3,931,868 $ 8,379,601
Account receivable - affiliates 7,968,236 6,008,872
Accounts receivable, net 292,860 257,820
Inventories 10,049,244 7,887,826
Prepaid expenses and other 6,628,686 2,896,833
Deferred tax asset --- ---
----------- -----------
Total current assets 28,870,894 25,430,952
----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Refinery property, plant and equipment 23,172,404 23,165,353
Gas plant, property and equipment 4,993,880 4,855,654
Less: Accumulated depreciation (7,266,774) (6,550,919)
----------- -----------
20,899,510 21,470,088
Construction in progress 931,365 147,712
----------- -----------
Total property, plant and equipment 21,830,875 21,617,800
----------- -----------
OTHER ASSETS
Interco Deferred Inc Tax Rec --- ---
Other Assets 282,987 289,005
----------- -----------
Total other assets 282,987 289,005
----------- -----------
TOTAL ASSETS $50,984,756 $47,337,757
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
MAY 31 DECEMBER 31
CURRENT LIABILITIES 1995 1994
----------- -----------
Accounts payable - affiliates $10,811,769 $10,853,802
Accounts payable 2,326,338 649,983
Income taxes payable - affiliate 2,144,000 ---
Accrued liabilities 575,157 2,227,067
----------- -----------
Total current liabilities 15,857,264 13,730,852
----------- -----------
NON-CURRENT LIABILITIES
Deferred income taxes --- 1,184,500
Accrued turnaround costs 2,430,151 1,953,671
Other 156,799 130,312
----------- -----------
Total non-current liabilities 2,586,950 3,268,483
----------- -----------
SHAREHOLDER'S EQUITY
Common stock, .01 par value: 1,000
voting shares authorized, issued and
outstanding 10 10
Contributed capital 3,200,090 3,200,090
Dividends distributed (58,644,838) (56,781,138)
Retained earnings 87,985,280 83,919,460
----------- -----------
Total shareholder's equity 32,540,542 30,338,422
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $50,984,756 $47,337,757
=========== ===========
/TABLE
SCHEDULE 3.01(n)
SUMMARY OF OPERATIONS
BLOOMFIELD REFINING COMPANY
FIVE YEAR HISTORICAL EBITD
($ IN THOUSANDS)
1990 1991 1992 1993 1994 Average
------- ------- ------- ------- ------- -------
Sales - BPD 14,738 13,820 14,616 15,585 16,009 14,954
Gross Margin - $/B 6.25 4.77 5.63 7.41 6.82 6.18
Sales $172,244 $132,814 $140,123 $145,864 $139,040 $146,017
Raw Materials 138,608 108,742 110,089 103,684 99,218 112,068
------- ------- ------- ------- ------- -------
Gross Margin 33,636 24,072 30,034 42,180 39,822 33,949
Direct Operating Costs 5,309 5,694 5,808 5,892 6,078 5,756
Maintenance (Incl. Turnaround Accrual) 3,195 3,105 2,964 3,022 3,677 3,193
Utilities 2,505 2,542 2,425 2,607 3,152 2,646
Refinery G&A (1) 1,190 1,355 1,405 1,329 1,599 1,376
Transportation & Pipeline Divisions (2) (221) (127) (137) (263) (665)
(283)
------- ------- ------- ------- ------- -------
EARNINGS BEFORE INTEREST,
TAXES AND DEPRECIATION 21,658 11,503 17,569 29,593 25,981 21,261
======= ======= ======= ======= ======= =======
(1) Excludes G&A allocated from Denver Office.
(2) Transportation and pipeline fees are included as costs in raw
materials expense and as revenues in these divisions.
CONFIDENTIAL TREATMENT REQUESTED AND SCHEDULE FILED
WITH THE SEC UNDER SEPARATE COVER.
SCHEDULE 3.02.g
CERTAIN PERMITS, LICENSES AND CONTRACTS
ACCEPTED BY PURCHASER
Contract Description: Refined Product Exchange
Parties: Gary-Williams Energy Corporation ("GWEC") and XXXXXXXXXX
Date: 3/24/88, effective 5/1/88
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Assignability: Yes, with prior written consent of other party
Contract Description: Refined Product Sales
Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX
Date: 2/1/95
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Assignability: Yes, with prior written consent of other party,
approval will not be unreasonably withheld
Contract Description: Refined Product Sales
Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX
Date: 12/17/91, effective 1/1/92
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Assignability: Yes, with prior consent
Contract Description: Refined Product Exchange
Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX
Date: 12/6/90, effective 12/1/90
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Assignability: Yes, with notice and consent of other party
Contract Description: Refined Product Exchange
Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX
Date: 8/12/91, effective 9/1/91
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Assignability: Yes, with prior consent of other party
Contract Description: Refined Product Sales
Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX
Date: 1/24/94, effective 2/1/94
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Assignability: Yes, with prior consent of other party
Contract Description: Refined Product Sales
Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXX
Date: 7/26/94, effective 8/1/94
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Assignability: Yes, with prior consent of other party
Contract Description: Refined Product Exchange
Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX
Date: 8/25/89, effective 9/1/89
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Assignability: Yes, with prior consent of other party
Contract Description: Y Grade Sales Contract
Parties: GWEC and XXXXXXXXXXXXXXXXXXX
Date: 5/1/88
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Assignability: Yes, with consent of both parties
Contract Description: Refined Product Exchange/Buyback
Parties: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Date: 12/20/84, effective 1/1/85
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Assignability: Yes, with prior consent of other party
Contract Description: JP-8 Sales Contract on a bulk basis
Parties: Defense Fuel Supply Center
Date: 3/30/95, effective 10/1/95
Termination: Government may terminate performance of work under the
contract in whole or in part
Assignability: Yes, covered by F.A.R. regulations as a "novation"
Contract Description: JP-4 Sales Contract on a bulk basis
Parties: Defense Fuel Supply Center
Date: 9/19/94, effective 10/1/94
Termination: Government may terminate performance of work under the
contract in whole or in part
Assignability: Yes, covered by F.A.R. regulations as a "novation"
Contract Description: Loading Rack Agreement
Parties: GWEC
Notes: Sample form provided
Contract Description: Truck Lease
Parties: GWEC
Notes: Sample form provided
Contract Description: Standby Services Agreement
Parties: Bloomfield Refining Company ("BRC") and City of Bloomfield
Date: 7/1/90, as amended 6/5/95
Termination: Year to year after 6/30/95, terminable on 90 days' notice
prior to end of term
Assignability: Yes, with prior written consent of other party
Notes: Agreement shall terminate immediately if BRC ceases to own the
Site or use the Site for operation of a refinery
Contract Description: Electric Utility System General Service Agreement
Parties: BRC and City of Farmington
Date: 7/14/87, as amended
Termination: Terminates 6/30/98
Assignability: Silent
Contract Description: Crude Contract
Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX
Date: 3/1/93
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Assignability: Yes, with prior consent of other party
Contract Description: Crude Contract
Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX
Date: 6/5/95
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
notice prior to end of term
Assignability: Yes, with prior written consent of both parties
Contract Description: Crude Contract
Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX
Date: 6/5/95
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Assignability: Yes, with prior written consent of both parties
Contract Description: Crude Contract
Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX
Date: 6/29/90
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Assignability: Yes, with prior written consent of both parties
Contract Description: Crude Contract
Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX
Date: 5/18/94
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Assignability: Yes, with prior written consent of both parties
Notes: Term is 18 months from date of first purchase, then month to month
Contract Description: Pipeline Services
Parties: BRC and Llaves Pipeline Limited
Date: 2/8/94
Termination: Month to month, terminable upon 30 days' notice by either
party
Assignability: Silent
Contract Description: Crude Contract
Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX
Date: 4/6/95
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Assignability: Silent
Notes: General Provisions not in file
Contract Description: Crude Contract
Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX
Date: 1994
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Assignability: Yes, with prior consent of GWEC
Notes: Crude purchased under 100% indemnifying Dos
Contract Description: Crude Contract
Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX
Date: 11/4/92, as amended
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Assignability: Yes, with prior written consent of both parties
Contract Description: Crude Contract
Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX
Date: 1/6/92
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Assignability: Yes, with prior written consent of both parties
Contract Description: Crude Contract
Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX
Date: 1/21/94
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Assignability: Yes, with prior written consent of both parties
Contract Description: Crude Contract
Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX
Date: 11/1/94
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Assignability: Yes, with prior written consent of both parties
Contract Description: Crude Contract
Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX
Date: 5/17/94
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Assignability: Yes with prior written consent of both parties
Contract Description: Crude Contract
Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX
Notes: Appears crude purchase contract with XXXXXXXXXXX was assigned
to XXXXXXXXXX; however, no contract and no assignment or assumption
agreement in file
Contract Description: Crude Contract
Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX
Date: 11/9/93
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Assignability: Yes, with prior consent of both parties
Contract Description: Crude Contract
Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX
Date: 3/5/93
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Assignability: Yes, with prior consent of both parties
Contract Description: Crude Contract
Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXX
Date: 7/1/87, as amended
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Assignability: Silent
Contract Description: Crude Contract
Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX
Date: 12/16/92
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Assignability: Silent
Contract Description: Crude Contract
Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX
Date: 1/24/95
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Assignability: Silent
Notes: General provisions not in file
Contract Description: Crude Contract
Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX
Date: 8/9/90
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Assignability: Yes, with prior written consent of other party
Contract Description: Sulferox Usage Contract
Parties: BRC and Coastal Chemical Company, Inc.
Date: 1/11/95
Termination: Silent
Assignability: Silent
Contract Description: Sulferox Usage Contract
Parties: BRC and The Dow Chemical Company
Date: 9/29/94
Termination: Terminates 24 months from 1/1/94
Assignability: Silent
Contract Description: Shell Sulferox Process - Confidence Agreement
Parties: BRC and The Dow Chemical Company
Date: 10/25/91
Termination: Silent
Assignability: Silent
Contract Description: Sulferox Process License Agreement
Parties: BRC and The Dow Chemical Company
Date: 1/19/93
Termination: Expires 20 years from 1/19/93
Assignability: Yes, with prior written consent of other party
Contract Description: Nondisclosure Letter Agreement
Parties: BRC and UOP
Date: 8/24/94
Termination: Silent
Assignability: Silent
Contract Description: Service Agreement
Parties: BRC and UOP
Date: 1/19/95
Termination: Silent
Assignability: Silent
Contract Description: Supplemental Agreement to Termination and Transfer
Agreement
Parties: BRC and UOP Process Division
Date: 11/1/84
Termination: Silent
Assignability: Silent
Contract Description: Termination and Transfer Agreement
Parties: BRC and UOP Process Division
Date: 11/1/84
Termination: Silent
Assignability: Silent
Contract Description: UOP Fluid Catalytic Cracking Process License
Agreement
Parties: BRC and UOP Process Division
Date: 11/1/84
Termination: Terminable upon 6 months' prior written notice
Assignability: Yes, with prior written consent of other party
(see Section 11.1 for other options)
Contract Description: UOP Fixed-Bed Platforming Process License Agreement
Parties: BRC and UOP Process Division
Date: 11/1/84
Termination: Terminable upon six months' prior written notice
Assignability: Yes, with prior written consent of other party (see
Section 11.1 for other options)
Contract Description: UOP Merox Process License Agreement
Parties: BRC and UOP Process Division
Date: 11/1/84
Termination: Terminable upon six months' prior written notice
Assignability: Yes, with prior written consent of other party (see
Section 11.1 for other options)
Contract Description: Radiation Machine Registration #IN 45086
Parties: BRC and State of New Mexico
Date: 1/4/94
Termination: Silent
Assignability: Silent
Contract Description: Stormwater General Permit No. NMR00A013
Parties: BRC and U.S. EPA
Date: 12/31/92
Contract Description: Oil Spill Response Plan*
Parties: BRC and U.S. EPA
Date: 12/20/94
Contract Description: Part B Operating Permit Application for Hazardous
Wastewater Treatment Surface Impoundments NMD 089 416416*
Parties: BRC and New Mexico Environment Department
Date: 9/24/94
Contract Description: Air Quality Permit No. 402-M-6
Parties: BRC and New Mexico Environment Department
Date: 5/30/95
Contract Description: Operating Permit Application No. P024
Parties: BRC and New Mexico Environment Department, Air Pollution Control
Bureau
Date: 6/21/95
Contract Description: Right-of-Way NM 65269*
Parties: BRC and U.S. Department of Interior Bureau of Land Management
Date: 10/30/87
Contract Description: Right-of-Way NMNM 68405*
Parties: BRC and U.S. Department of Interior Bureau of Land Management
Date: 1/14/92
Contract Description: Right-of-Way NMNM 93645*
Parties: BRC and U.S. Department of Interior Bureau of Land Management
Date: 12/29/94
Contract Description: Right-of-Way NMNM 91447*
Parties: BRC and U.S. Department of Interior Bureau of Land Management
Date: 5/6/94
Contract Description: Letter from the New Mexico Oil Conservation
Division approving the installation of Recovery Well Nos. 14, 15, 16, 17,
18, 19*
Parties: BRC and State of New Mexico Energy, Minerals and Natural
Resources Dept., Oil Conservation Division
Date: 6/4/90
Contract Description: Application filed with the Office of the State
Engineer for permitting of Recovery Well Nos. 1, 2, 3*
Parties: BRC and State of New Mexico
Date: 10/4/88
Contract Description: Discharge Plan GW-01*
Parties: BRC and State of New Mexico Energy, Minerals and Natural
Resources Dept., Oil Conservation Division
Date: 5/24/94
Contract Description: Certificate of Construction No. 2593-2 and 3385
Evaporation Ponds
Parties: BRC and State of New Mexico
Date: 10/21/94
Contract Description: Discharge Plan GW-130*
Parties: BRC and State of New Mexico Energy, Minerals and Natural
Resources Dept., Oil Conservation Division
Date: 11/5/93
Contract Description: Application for Permit for Alternate Point of
Diversion of Surface Waters No. 3385 River Terrace
Parties: BRC and State of New Mexico
Date: 7/17/89
Contract Description: Application for Permit for Alternate Point of
Diversion of Surface Waters No. 3385 Hammond Ditch
Parties: BRC and State of New Mexico
Date: 8/6/87
Contract Description: Administrative Order on Consent Docket No. V1-303-H
Parties: BRC and U.S. EPA
Date: 12/31/92
Contract Description: Gas Sales/Purchase Contract
Parties: BRC and Conoco Inc.
Date: 7/1/95
Termination: One year term, then month to month, terminable on 30 days'
written notice.
Assignability: Silent
Notes: See Paragraph 13 - Confidentiality
Contract Description: Crude Contract
Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX
Date: 8/1/95
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Assignability: Silent
Contract Description: Crude Exchange Contract
Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX
Date: 5/27/87
Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Assignability: Yes, with prior written consent of other party
*Buyer has not reviewed these documents in their entirety.
Notwithstanding Section 3.02(g), as soon as practicable after the date
hereof, Sellers shall supply such documents to Buyer. Buyer shall notify
Sellers in writing within 3 business days after receipt thereof if such
documents do not meet the criteria of Section 3.02(g), in which event,
and notwithstanding anything contained in this Agreement to the contrary,
this Agreement shall terminate and neither Buyer nor Seller shall have
any further duties, obligations or liabilities to each other under this
Agreement. If Buyer notifies Sellers within such 3-day period that such
documents meet the criteria set forth in Section 3.02(g), or if Buyer
does not notify Sellers within such 3-day period, this Agreement shall
continue and be in full force and effect in accordance with its terms and
such documents will be deemed to meet the criteria of Section 3.02(g).
SCHEDULE 5.02(A)
RETAINED EMPLOYEES
Dave Roderick
Contract No.__________
SCHEDULE 6.02(i)
BOR Draft Permit
UNITED STATES
DEPARTMENT OF THE INTERIOR
BUREAU OF RECLAMATION
COLORADO RIVER STORAGE PROJECT
NAVAJO UNIT
DRAFT
WATER SERVICE CONTRACT BETWEEN THE UNITED STATES AND
BLOOMFIELD REFINING COMPANY
FOR FURNISHING WATER
THIS CONTRACT, made this _____ day of _____________________,
19_____, pursuant to the Act of Congress approved June 17, 1902 (32
Stat. 388), and acts amendatory thereof or supplementary thereto,
and particularly pursuant to the Colorado River Storage Project Act
approved April 11, 1956 (70 Stat. 105), between THE UNITED STATES
OF AMERICA, hereinafter referred to as the United States,
represented by the officer executing this contract, his duly
appointed successor or his duly authorized representative,
hereinafter referred to as the Contracting Officer, and Bloomfield
Refining Company, a company organized under the laws of the State
of Delaware, and subsidiary of Gary Williams Energy Corporation,
with an office at 370 17th St., Suite 5300, Denver, CO 80202,
hereinafter referred to as the Contractor.
WITNESSETH:
WHEREAS, the following statements are made in explanation:
(a) The United States has constructed Navajo Dam and
Reservoir as a unit of the Colorado River Storage Project, for the
furnishing of water for irrigation, municipal, industrial, and
other beneficial uses.
(b) The Contractor is in need of a municipal water supply for
industrial use in the area for a petroleum refinery, and water is
available on a temporary basis to supply the Contractor from Navajo
Reservoir.
NOW, THEREFORE, in consideration of the mutual and dependent
covenants herein contained, the parties hereto agree as follows:
GENERAL DEFINITIONS
(1) Where used in this contract:
(a) "Federal Reclamation Laws" means the Act of June 17,
1902 (32 Stat. 388), and all acts amendatory thereafter
supplementary thereto.
(b) "Secretary" or "Contracting Officer", or either of
them means the Secretary of the Interior or his duly authorized
representative.
(c) "Contractor" means Bloomfield Refining Company, a
company organized under the laws of the State of Delaware.
(d) "Service" means the United States Fish and Wildlife
Service.
TERM OF CONTRACT
2. (a) This contract shall be effective for 5 years from
the date of execution contingent upon reviews of the Contractor's
refinery operation as it relates to and is in compliance with the
Environmental Protection Agency (EPA), Region 6, Resource
Conversation and Recovery Act, Section 3013 Final Order, Section
3008(h) Final Order on Consent. Depending on reviews conducted by
the Contracting Officer, with EPA personnel for compliance with the
above requirements, the contract can be terminated by a 2-week
advance notice by the Contracting Officer for noncompliance with
these environmental laws as required in Articles 11(F) and 11(G) of
this contract.
(b) This contract is contingent on the issuance of a
current Diversion Permit by the State of New Mexico.
WATER DELIVERY
3. (a) The United States grants the Contractor the right,
during the term of this contract, to have delivered from Navajo
Reservoir, as hereinafter provided, 340 acre-feet of water per
year at such times as best suits its needs and the Contractor shall
pay for the water as provided in Article 5.
(b) The Contractor shall have no holdover rights to
water supplied under this contract from year to year. Any water
purchased hereunder not called for by the end of each contract year
shall become integrated with the water supply for all purposes of
the Navajo Reservoir and be available for all purposes at that
time.
FOR INDUSTRIAL USE
4. The water sold hereunder shall be used by the Contractor
for industrial use. The Contractor shall prepare and furnish such
reports on water use and related data as required by the
Contracting Officer.
RATE AND METHOD OF PAYMENT FOR WATER
5. The Contractor shall pay in advance for the quantity of
water which it has contracted to take and pay for, whether or not
it actually takes and uses such water, at a rate of $49.27 per
acre-foot, plus $1.00 per acre-foot for operation and maintenance
charges, for a total payment of $17,091.80.
COMPLIANCE WITH THE NATIONAL ENVIRONMENTAL POLICY ACT
AND THE ENDANGERED SPECIES ACT
6. (a) Net impacts on endangered species must be identified
and mitigated in order to comply with the National Environmental
Policy Act of 1969 (Public Law 91-190). The Contracting Officer
has consulted with the United States Fish and Wildlife Service
under Section 7 of the Endangered Species Act of 1973 (Public Law
93-205) to determine if use of water under this contract will
adversely impact endangered species.
(b) Pursuant to Section 7 of the Endangered Species Act,
the United States Fish and Wildlife Service rendered a biological
opinion, dated March 5, 1992, which identified adverse impacts to
the endangered Colorado squawfish and razorback sucker in
connection with use of water under this contract. As a
conversation measure taken against these adverse impacts, the
Service has recommended, and the Contractor agrees to pay a
surcharge as a condition of water service. This surcharge shall be
commensurate with the established rate for all municipal and
industrial water service from the initial units of the Colorado
River Storage Project. The rate has been set for the year 1995 at
$49.27 per acre-foot.
(c) The conservation measure surcharge payment is
separate from the payment to the Contracting Officer for water
service. The surcharge payment shall be made prior to the
execution of this contract. The surcharge payment shall be sent to
the United States Fish and Wildlife Service, P. O. Box 1306,
Albuquerque, New Mexico 87103.
MEASUREMENT AND RESPONSIBILITY FOR DISTRIBUTION
7. (a) The water to be furnished to the Contractor will be
measured by facilities of the United States and delivered into San
Juan River at the outlet works of Navajo Reservoir. The Contractor
shall suffer all distribution and administration losses from the
point of such delivery to the place of use. The Contractor agrees
to provide a measuring device, which is acceptable to the
Contracting Officer, at or near the Contractor's point of
diversion, to measure the quantity of water delivered and diverted
under this contract. The Contractor is responsible for making
arrangements with the State of New Mexico and others needed for the
transportation and diversion of such water. The Contractor shall
pay any charges from the New Mexico State Engineer's Office for the
distribution, handling, or administration of this water.
(b) The United States shall not be responsible for the
control, carriage, handling, use, disposal, or distribution of
water taken by the Contractor hereunder, and the Contractor shall
hold the United States harmless on account of damage or claim of
damage of any nature whatsoever, including property damage,
personal injury or death arising out of or connected with the
control, carriage, handling, use, disposal, or distribution of such
water by the Contractor.
(c) This contract and all water taken pursuant thereto
shall be subject to and controlled by the Colorado River Compact
dated November 24, 1922, and proclaimed by the President of the
United States, June 25, 1929, the Boulder Canyon Project Act
approved December 21, 1928, the Boulder Canyon Project Adjustment
Act of July 19, 1940, the Upper Colorado River Basin Compact dated
October 11, 1948, the Mexican Water Treaty of February 3, 1944, and
the Colorado River Basin Project Act of September 30, 1968, Public
Law 90-537. In the event water available to the Contractor is
required to be curtailed under and by reason of the provisions of
the foregoing acts, including the reaching of maximum use of water
allotted to the State of New Mexico, no liability shall attach to
the United States for such curtailment, and the Contractor agrees
to reduction of the amount of water taken hereunder as the
Secretary determines necessary to comply with the provisions of
said acts.
UNITED STATES NOT LIABLE FOR WATER SHORTAGE ADJUSTMENTS
8. On account of drought, errors in operation, or other
causes, there may occur at times, a shortage during any year in the
quantity of water available to the Contractor by the United States
pursuant to this contract through and by means of the project, and
in no event shall any liability accrue against the United States or
any of its officers, agents, or employees for any damage direct or
indirect, arising therefrom. In any year in which there may occur
such a shortage, the United States reserves the right to apportion
the available water supply among the Contractor and others
entitled, under existing and future contracts, to receive water
from the same project water supply all in a manner to be prescribed
by the Contracting Officer.
CHARGES FOR DELINQUENT PAYMENTS
9. (a) The Contractor shall be subject to interest,
administrative and penalty charges on delinquent installments or
payments, pursuant to Section 11 of the Debt Collection Act of 1982
(Public Law 97-365). When a payment is not received within 30 days
of the due date, the Contractor shall pay an interest charge for
each day the payment is delinquent beyond the due date. When a
payment becomes 60 days delinquent, the Contractor shall pay an
administrative charge to cover additional costs of billing and
processing the delinquent payment. When a payment is delinquent 90
days or more, the Contractor shall pay an additional penalty charge
of 6 percent per year for each day the payment is delinquent beyond
the due date. Further, the Contractor shall pay any fees incurred
for debt collection services associated with a delinquent payment.
(b) The interest charge rate shall be the greater of the
rate prescribed quarterly in the FEDERAL REGISTER by the Department
of the Treasury for application to overdue payments, or the
interest rate of 0.5 percent per month prescribed by Section 6 of
the Reclamation Project Act of 1939 (Public Law 76-260). The
interest charge rate shall be determined as of the due date and
remain fixed for the duration of the delinquent period.
(c) When a partial payment on a delinquent account is
received, the amount received shall be applied first to the penalty
and administrative charges, second, to the accrued interest, and
third to the overdue payment.
NOTICES
10. Any notice, demand, or request authorized or required by
this contract shall be deemed to have been given, on behalf of the
Contractor when mailed, postage prepaid, or delivered to the
Regional Director, Upper Colorado Region, Bureau of Reclamation, PO
Box 11568, 125 South State Street, Salt Lake City, Utah 84147, and
on behalf of the United States, when mailed, postage prepaid, or
delivered, to the Gary Williams Energy Corporation, 370 17th
Street, Suite 5300, Denver, Colorado 80202. The designation of the
addressee or the address may be changed by notice given in the same
manner as provided in this article for other notices.
STANDARD CONTRACT ARTICLES
11. The standard contract articles applicable to this
contract are listed below. The full text of these standard
articles is attached as Exhibit A and is hereby made a part of this
contract.
A. Contingent Upon Appropriation or Allotment of Funds
B. Officials Not to Benefit
C. Assignment Limited - Successor's and Assigns
Obligated
D. Books, Records, and Reports
E. Rules, Regulation, and Determinations
F. Quality of Water
G. Water and Air Pollution Control
H. Equal Opportunity
I. Compliance with Civil Rights Laws and Regulations
IN WITNESS WHEREOF, the parties hereto have signed their names
the day and year first above written.
THE UNITED STATES OF AMERICA
By:_______________________________
(seal) Regional Director
Bureau of Reclamation
By:_______________________________
ATTEST:
__________________________________
Secretary
EXHIBIT A
A. CONTINGENT ON APPROPRIATION OR ALLOTMENT OF FUNDS
The expenditure or advance of any money or the performance of
any obligation of the United States under this contract shall be
contingent upon appropriation or allotment of funds. Absence of
appropriation or allotment of funds shall not relieve the
Contractor from any obligations under this contract. No liability
shall accrue to the United States in case funds are not
appropriated or allotted.
B. OFFICIALS NOT TO BENEFIT
No Member of or Delegate to Congress, Resident Commissioner or
official of the Contractor shall benefit from this contract other
than as a water user or landowner in the same manner as other water
users or landowners.
C. ASSIGNMENT LIMITED-SUCCESSORS AND ASSIGNS OBLIGATED
The provisions of this contract shall apply to and bind the
successors and assigns of the parties hereto, but no assignment or
transfer of this contract or any right or interest therein shall be
valid until approved in writing by the Contracting Officer.
D. BOOKS, RECORDS AND REPORTS
The Contractor shall establish and maintain accounts and other
books and records pertaining to administration of the terms and
conditions of this contract, including: the Contractor's financial
transactions, water supply data, project operation, maintenance and
replacement logs, and project land and right-of-way use agreements;
the water users' land-use (crop census), land-ownership,
land-leasing and water-use data; and other matters that the
Contracting Officer may require. Reports thereon shall be
furnished to the Contracting Officer in such form and on such date
or dates as the Contracting Officer may require. Subject to
applicable Federal laws and regulations, each party to this
contract shall have the right during office hours to examine and
make copies of the other party's books and records relating to
matters covered by this contract.
E. RULES, REGULATIONS, AND DETERMINATIONS
(1) The parties agree that the delivery of water or the use
of Federal facilities pursuant to this contract is subject to
Reclamation law, as amended and supplemented, and the rules and
regulations promulgated by the Secretary of the Interior under
Reclamation law.
(2) The Contracting Officer shall have the right to make
determinations necessary to administer this contract that are
consistent with the expressed and implied provisions of this
contract, the laws of the United States and the State, and the
rules and regulations promulgated by the Secretary of the Interior.
Such determinations shall be made in consultation with the
Contractor.
F. QUALITY OF WATER
The operation and maintenance of project facilities shall be
performed in such manner as is practicable to maintain the quality
of raw water made available through such facilities at the highest
level reasonably attainable, as determined by the Contracting
Officer. The United States does not warrant the quality of water
and is under no obligation to construct or furnish water treatment
facilities to maintain or better the quality of water.
G. WATER AND AIR POLLUTION CONTROL
The Contractor, in carrying out this contract, shall comply
with all applicable water and air pollution laws and regulations of
the United States and the State of New Mexico, and shall obtain all
required permits or licenses from the appropriate Federal, State,
or local authorities.
H. EQUAL OPPORTUNITY
During the performance of this contract, the Contractor agrees
as follows:
(1) The Contractor will not discriminate against any employee
or applicant for employment because of race, color, religion, sex,
or national origin. The Contractor will take affirmative action to
ensure that applicants are employed, and that employees are treated
during employment, without regard to their race, color, religion,
sex, or national origin. Such action shall include, but not be
limited to, the following: Employment, upgrading, demotion, or
transfer; recruitment or recruitment advertising; layoff or
termination; rates of pay or other forms of compensation; and
selection for training, including apprenticeship. The Contractor
agrees to post in conspicuous places, available to employees and
applicants for employment, notices to be provided by the
Contracting Officer setting forth the provisions of this
nondiscrimination clause.
(2) The Contractor will, in all solicitations or
advertisements for employees placed by or on behalf of the
Contractor, state that all qualified applicants will receive
consideration for employment without discrimination because of
race, color, religion, sex, or national origin.
(3) The Contractor will send to each labor union or
representative of workers, with which it has a collective
bargaining agreement or other contract or understanding, a notice,
to be provided by the Contracting Officer, advising the said labor
union or workers' representative of the Contractor's commitments
under Section 202 of Executive Order 11246 of September 24, 1965,
and shall post copies of the notice in conspicuous places available
to employees and applicants for employment.
(4) The Contractor will comply with all provisions of
Executive Order No. 11246 of September 24, 1965, as amended, and of
the rules, regulations, and relevant orders of the Secretary of
Labor.
(5) The Contractor will furnish all information and reports
required by said amended Executive Order and by the rules,
regulations, and orders of the Secretary of Labor, or pursuant
thereto, and will permit access to its books, records, and accounts
by the Contracting Officer and the Secretary of Labor for purposes
of investigation to ascertain compliance with such rules,
regulations, and orders.
(6) In the event of the Contractor's noncompliance with the
nondiscrimination clauses of this contract or with any of the such
rules, regulations, or orders, this contract may be canceled,
terminated, or suspended, in whole or in part, and the Contractor
may be declared ineligible for future Government contracts in
accordance with procedures authorized in said amended Executive
Order, and such other sanctions may be imposed and remedies invoked
as provided in said Executive Order, or by rule, regulation, or
order of the Secretary of Labor, or as otherwise provided by law.
(7) The Contractor will include the provisions of paragraphs
(1) through (7) in every subcontract or purchase order unless
exempted by the rules, regulations, or orders of the Secretary of
Labor issued pursuant to Section 204 of said amended Executive
Order, so that such provisions will be binding upon each
subcontractor or vendor. The Contractor will take such action with
respect to any subcontract or purchase order as may be directed by
the Secretary of Labor as a means of enforcing such provisions,
including sanctions for noncompliance: PROVIDED, HOWEVER, That in
the event the Contractor becomes involved in, or is threatened
with, litigation with a subcontractor or vendor as a result of such
direction, the Contractor may request the United States to enter
into such litigation to protect the interests of the United States.
I. COMPLIANCE WITH CIVIL RIGHTS LAWS AND REGULATIONS
(1) The Contractor shall comply with Title VI of the Civil
Rights Act of 1964 (42 U.S.C. 2000d), Section 504 of the
Rehabilitation Act of 1975 (Public Law 93-112, as amended), the Age
Discrimination Act of 1975 (42 U.S.C.6101, et. seq.) and any other
applicable civil rights laws, as well as with their respective
implementing regulations and guidelines imposed by the U.S.
Department of the Interior and/or Bureau of Reclamation.
(2) These statutes require that no person in the United
States shall, on the grounds of race, color, national origin,
handicap, or age, be excluded from participation in, be denied the
benefits of, or be otherwise subjected to discrimination under any
program or activity receiving financial assistance from the Bureau
of Reclamation. By executing this contract, the Contractor agrees
to immediately take any measures necessary to implement this
obligation, including permitting officials of the United States to
inspect premises, programs, and documents.
(3) The Contractor makes this agreement in consideration of
and for the purpose of obtaining any and all Federal grants, loans,
contracts, property discounts or other Federal financial assistance
extended after the date hereof to the Contractor by the Bureau of
Reclamation, including installment payments after such date on
account of arrangements for Federal financial assistance which were
approved before such date. The Contractor recognizes and agrees
that such Federal assistance will be extended in reliance on the
representations and agreements made in this article, and that the
United States reserves the right to seek judicial enforcement
thereof.